This article is from the Australian Property Journal archive
THE Centuria Industrial REIT (CIP) has picked up a Perth data centre for $39 million, and in future could eye off conversion opportunities within its existing portfolio to enhance its exposure to the booming sub-sector, while also out west it has renewed its largest tenant.
The five megawatt centre at 16 Mulgul Road, in Malaga WA is leased to Japanese multinational information and communications service provider Fujitsu. The 6,561 sqm centre is located 13 kilometres north of Perth’s CBD and less than a kilometre from the Malaga zone substation.
“This rare, off-market opportunity to secure a modern data centre allows CIP to benefit from increased occupier demand as global data consumption is expected to continue its significant growth trajectory,” CIP fund manager Grant Nichols said.
“Demand for AI and cloud-based solutions are driving data centre growth as both businesses and consumers continue their rapid adoption of these technologies. In addition, Perth is also becoming increasingly relevant as a data centre market due to its connectivity to Asia via the Australia-Singapore Cable submarine cable system.”
The acquisition increases CIP’s data centre sub-portfolio to two assets collectively worth $456 million, representing about 12% of its total portfolio. The other asset is the Telstra data centre complex in south-east Melbourne that it acquired in a $416.7 million sale and leaseback deal four years ago.
Nichols told Australian Property Journal that further data centre acquisitions are “certainly something we’ll explore if the opportunities arise.”
“I think there is also potentially an opportunity to look at potential data centre conversions in the future,” he said.
CIP, Centuria generally and the fund that owns the just-purchased data centre has a portfolio predominantly exposed to urban infill industrial markets, he said, and “a lot of those probably do lend themselves to conversion to data centres at some point in time”.
“They’re probably in a preferred location as you want to be closer to your end user to reduce things like latency, so from that perspective there’s probably an opportunity for us to explore that further.”
He said CIP at this stage hadn’t yet identified any single site within its portfolio to progress with a conversion play.
WA leasing success
Meanwhile, CIP’s has secured Western Australia’s largest leasing deal for the 2024 calendar year to date. The REIT logistics and warehousing specialist AWH, across 94,241 sqm in Bibra Lake for a further seven years from August 2025.
The deal at 310 Spearwood Avenue and Lot 14 Sudlow Road included extended AWH’s lease across 89,535 sqm in addition to securing a further 4,706 sqm within the properties.
AWH is one of CIP’s top 10 tenant customers, accounting for 4% of the REIT’s annual rental income, and is CIP’s largest tenant by area.
“We haven’t got a whole lot of space remaining in our WA portfolio, which has been really pleasing. We’ve seen really strong tenant demand for industrial nationally – the WA market hasn’t been materially different to what we’ve seen on the east coast,” Nichols told Australian Property Journal.
In its March quarter operating update, CIP said it had achieved re-leasing spreads of circa 50% in the financial year-to-date.
Nicholas said the greatest rental growth had been the infill markets in Sydney and in Melbourne’s south-east, and “they’re the two markets where we see the opportunity for further rental growth, but saying that we have seen rental growth across every market we’ve got exposure to”.
Strong re-leasing spreads and significant leasing activity buffeted the results in its latest round of revaluations, with continued rental growth offsetting the incurred increase in the capitalisation rates. CIP completed external valuations on 50 of its 89 investment properties, which showed a circa $5 million like-for-like increase on prior book values, reflecting a portfolio increase of 0.1%.
The weighted average capitalisation across the total portfolio expanded 17 basis points on a like-for-like basis over the last half to 5.81%.
