This article is from the Australian Property Journal archive
THE industrial market shows no signs of slowing with Leda Holdings netting $152 million from the sale of an infill landholding in Sydney’s tightly held southern industrial region, just four years after acquiring the property for $52 million.
The deal marks yet another major acquisition in Australia by pan-Asian logistics giant ESR. Its newly acquired 270-286 Horsley Road property in Milperra spans 7.71 hectares and is earmarked for a new multi-storey logistics redevelopment, with ESR capitalising on the 1:1 FSR and unlimited height restrictions. The proposed redevelopment will be the first of its kind in the area.
Colliers’ Gavin Bishop, Trent Gallagher and Sean Thomson managed the off-market deal. Colliers sold the property to Leda Holdings in 2018.
“Leda are looking to continue their long-proven strategy in targeting large-scale infill sites for development or repositioning,” Rob Ell, managing director of Leda Holdings said. Some of its major acquisitions in recent years include the former Johnson & Johnson manufacturing site in Caringbah and sites in Taren Point, Mascot and North Rocks.
“The Australian industrial and logistics sector has recorded phenomenal growth over the past two years, supported by macroeconomic tailwinds which have underpinned both occupier and investment demand,” Bishop said.
Almost $16 billion was spent on industrial and logistics assets in 2021, more than double the previous annual record.
Gallagher said demand for industrial land in Sydney continues unabated as institutional groups adopt a build-to-core strategy.
“Continued yield compression and limited buying opportunities have made it more challenging to acquire stabilised assets, and as a result, major institutions seek brownfield redevelopment opportunities.”
Western Sydney industrial land values skyrocketed by 51% in 2021, according to Colliers research. There is only four years of remaining land supply left in the region following record levels of take-up amid the e-commerce boom during COVID. Net developable industrial land has dropped 9.5% to 1,805 hectares since the middle of 2021.
Rental growth is expected to take the place of yield compression in impacting land values and be the key driver of further increases.
“The spike in land values has come in response to continued levels of yield compression and a lack of development opportunities,” Colliers said.
“Our view is that industrial land prices in western Sydney will increase again in 2022 and new pricing benchmarks will be set across both infill and greenfield sites. Whilst rising construction costs could place downward pressure on land values, this will be largely offset by the forecast rental growth in these locations.”
Western Sydney land values averaged $1,162 per sqm in the December quarter.
Colliers expects multi-storey warehousing will spread into more areas of the city, with schemes already underway in south Sydney.
Meanwhile, ESR has fully leased its first speculative development in Queensland, while last year it partnered with Singaporean sovereign wealth fund GIC to secure Blackstone’s Milestone logistics portfolio for $3.8 billion in Australia’s largest-ever property deal.
ESR became the Asia Pacific’s largest real asset manager following the acquisition of investment house ARA, which was officially completed in January.