Luke Crawford, Head of Logistics & Industrial Research, Australia and Tony Iuliano, International Director, Head of Logistics & Industrial, ANZ for Cushman & Wakefield
Some 89 percent of global property investors intend to deploy capital into Australian industrial properties in 2024, according to a survey by Cushman & Wakefield.
The global commercial real estate services firm has identified A$45 billion ($29 billion) of institutional dry powder looking to be invested into Australian industrial assets, most of which has been inactive over the last 12 months and is set to be deployed as debt markets stabilise, the property consultancy said in its 2024 Australian Logistics & Industrial Capital Markets outlook report published this month.
“Australia’s logistics and industrial sector has the lowest vacancy rate and highest rental growth in the world, so for many investors, it’s pretty hard to find an alternative compelling opportunity for investment,” Luke Crawford, head of Australia logistics and industrial research at Cushman & Wakefield told Mingtiandi.
Investor appetite for Australian logistics assets comes as Cushman & Wakefield projects a 10 million square metre cumulative shortfall of warehouse space in the country over the next decade based on the current supply pipeline, while demand is expected to remain buoyant thanks to favourable demographics, e-commerce penetration, and infrastructure investment.
Preference for Sheds
The poll of 130 investors based in Australia, Asia, Europe and the US spanned listed REITs, private equity investors, sovereign wealth funds, superannuation funds, unlisted funds, developers, family offices and high net worth individuals. Unlisted funds are private REITs that invest in commercial property assets on behalf of the trust’s unitholders.
86 percent of respondents cited industrial as their first choice for the Australian market over other property sectors including retail, office and hotel, while the overwhelming majority of respondents are planning to deploy capital into logistics assets within the first half of the year. Just 26 percent of respondents intend to divest their industrial holdings this year.
“In the first quarter of this year, we’ve already seen capital return to the market. There were many buyers who sat on the sidelines last year due to pricing uncertainty with regards to debt costs, but so far in 2024 we’ve seen a number of groups re-entering the market and starting to participate in campaigns,” said Tony Iuliano, international director and head of logistics and industrial for Australia and New Zealand at Cushman & Wakefield.
Australian Industrial Partnership Portfolio: Largest portfolio transaction of 2023 — acquired by UniSuper with investment manager Richmond Bridge for A$560 million
Offshore-backed domestic unlisted funds and Australian superannuation funds are expected to rank among the most acquisitive investors this year, building on their respective A$1 billion and A$750 million worth of logistics property investments in 2023, which accounted for a combined 34 percent of last year’s A$5.1 billion total industrial investment volume.
The A$3.5 trillion superannuation sector is expected to continue stepping up its property exposure from its current estimated allocation of 8 percent, after the pension giants’ property holdings increased to roughly A$170 billion in 2023 from just over A$80 billion a decade ago. Cushman & Wakefield expects the superannuation funds’ property allocation to increase over the next five years.
Sydney is investors’ top geographic target in Australia this year, followed by Brisbane and Melbourne. Across risk profiles, 63 percent of respondents expressed interest in core-plus and value-add strategies.
This year is also expected to see the re-emergence of larger portfolio acquisitions as capital re-enters the market, with Cushman & Wakefield pointing to several “significant” offshore investors seeking to build scale in the country. Despite single asset acquisitions dominating 2023, investors have been willing to pay a 50-85 basis point premium for portfolio deals in prior years in order to quickly bypass high barriers to scale, according to the consultancy.
“All the groups we’re speaking to, particularly offshore investors, want to build scale quickly. The easiest way to do that is to buy portfolios,” said Iuliano. “Now that we are seeing the pricing gap bridged, we expect to see a large pipeline of portfolios coming to market this year.”
Strong Fundamentals
Despite nationwide industrial leasing volume having tapered down from a pandemic-driven spike of 4.7 million square metres in 2021 given a lack of leasing options, the 3.6 million square metres of take-up recorded in 2023 is 54 percent above the 2010 to 2019 annual average of roughly 2.3 million square metres, driven by structural tailwinds including e-commerce growth, a manufacturing rebound, and supply chain adjustments.
Cushman & Wakefield expects the strong leasing demand to continue into 2024 with 3 to 3.2 million square metres of take-up this year, driven mainly by the transport, logistics and manufacturing sectors.
Axxess Corporate Park: Largest individual asset sale of 2023 sold by Cushman & Wakefield’s Logistics & Industrial Capital Markets team to Gateway Capital and Cadillac Fairview for A$315 million
Rental growth is set to ease from above-20 percent per annum levels recorded over the past two years as a projected 3.6 million square metres of new supply enters the market this year, with Cushman & Wakefield forecasting nationwide rental growth of 6 percent, while leasing rates in select infill markets where supply is more limited are projected to grow from 8.5 to 10 percent.
Despite the new stock, vacancy is expected to remain low as occupiers have already committed to taking up 45 percent of this year’s pipeline. In 2023 nationwide vacancy hovered near historic lows at 1.2 percent as of the fourth quarter, well below the 5 percent considered to represent market equilibrium.
“Fundamentals are very strong for this sector and from an outlook perspective, tailwinds including population growth and e-commerce penetration are going to remain strong. Overall, that’s why a lot of capital is very much focusing on the Australian logistics and industrial sector,” said Crawford.
With the logistics market’s fundamentals showing resilience and interest rates expected to begin declining in the second half of the year, Cushman & Wakefield is projecting an increase in transaction volume as capital returns to the market amid greater clarity on asset pricing.
>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : MingTiandi – https://www.mingtiandi.com/sponsored/australian-industrial-tops-global-investor-lists-cushman-wakefield/