This article is from the Australian Property Journal archive
A STAGGERING $45 billion of capital is looking to be deployed into Australian industrial real estate this year, after the sector recorded increased sales volumes in 2020 as logistics and warehousing assets were put under the spotlight during the pandemic.
While global investment volumes fell slightly in 2020, JLL research shows industrial and logistics investment sales down under totalled $4.4 billion – some 13% higher than the 10-year annual average and ahead of the circa $4 billion recorded in 2019.
Institutions remained the biggest buyer group last year, JLL found, representing 90% of total Australian transactions for deals worth $10 million and over.
The top three buyers, Charter Hall, Centuria and Allianz were all involved in substantial individual deals. Charter Hall and Allianz’s acquisition of an Aldi east coast distribution centre portfolio, worth $930 million over two sale and leaseback deals, was the second largest industrial transaction on record, while Centuria’s $417 million purchase of Telstra’s Melbourne data centre was the biggest single-asset purchase seen in Australia.
Tony Iuliano, JLL’s head of capital markets, industrial & logistics – Australia said REITs have dominated net acquisitions of industrial over the past three years, spurred on by the wave of sale and leaseback opportunities that have become available. Also among those was a Charter Hall partnership’s $214 million portfolio deal with Owens-Illinois Australia.
Sovereign wealth funds and insurance groups have also been net purchasers in that period.
JLL estimates $45 billion of capital is looking to be deployed into the industrial and logistics landscape in Australia in 2021.
“The opportunity to unlock/partner with certain groups will continue to be a trend going forward, as Australia has a very high barrier to entry with extremely limited scope to obtaining scale,” Iuliano said. JLL data shows an annual average of $4.5 billion in investment sales occurring over the last few years, following the peak of more than $7 billion seen in 2016.
Charter Hall recently secured backing from Dutch pension fund PGGM for a new $800 million partnership, while Dexus and GIC have expanded their partnership.
“Australia’s industrial and logistics sector has consistently delivered comparatively higher average returns than those generated overseas, and has shown low volatility of returns through the current cycle relative to other commercial property sectors,” JLL’s director of industrial research – Australia, Sass J-Baleh said.
“Institutional investment appetite continues to favour this sector due to high quality covenants in institutional grade assets and confidence in the ability to collect income. Industrial and logistics rent collection rates have remained high across most mature economies.”
Diversified companies such as Stockland are looking to reweight their portfolios towards the industrial sector.
Australia’s market offers a liquid, stable and strong return performance trend, low interest rates, a solid economic foundation, and robust growth mainly supported by a proactive COVID-19 containment response, expansionary fiscal policy, infrastructure expenditure, free trade agreements and population growth, J-Baleh said.
Global capital investment volumes decreased by 7% over the year to $147 billion, but this was relatively minor compared to the 35% fall in retail deals and 36% plunge for offices.
JLL surveyed 38 global and regional investors on how COVID-19 is impacting their strategic investment decision-making, including their investment intentions for major Asia Pacific geographies through to the end of 2021. Half of the respondents are planning to increase their exposure to the industrial and logistics sector in Australia.
