Big chill a boon for Australian industrial prospects
The humble fridge could be at the centre of an industrial fightback in 2016.
Refrigerated logistics facilities are expected to be among the most keenly sought after commercial properties in 2016, according to two agencies, with demand set to send prices and rents skyward.
An increase in supply saw industrial rents dive in every major market besides Sydney throughout 2015, with rents falling 1.9%.
Perth endured a 6.1% drop in rents, Adelaide fell 3.8% and Melbourne 3.3%, CBRE research shows, while Sydney rode a citywide stock shortfall to a 2.4% overall rent increase.
CBRE managing director of industrial and logistics, Matt Haddon, says a drop in supply in Sydney throughout 2016 will drive property prices and rents even higher.
“Strong supply (versus) demand fundamentals in Sydney will continue to support rental growth, while we forecast an uplift in values across core eastern seaboard logistics markets, as new stock is absorbed,” Haddon says.
Haddon predicts properties with cold storage facilities will be targeted specifically as investors seek a foothold in Australia’s food supply chain.
“Refrigerated logistics facilities will again be a sought after asset class for investors in all core capital city locations, as the importance of the food industry continues to emerge and be a growing driver in Australia’s economy,” he says.
Transactional activity is expected to remain relatively strong into 2016 as unsatisfied capital continue to seek investment opportunities
“We expect foreign interest in industrial and logistics assets to continue strengthening in 2016, with prime assets backed by secure covenants in core locations across the country, to be in most demand.”
“As supply levels begin to level out nationally, there will be significant opportunity for growth in the market this year.
Sydney underlined its position as the epicentre of Australia’s industrial market in 2015, with local and international investors wrapping up $1.67 billion worth of transactions, according to Savills’ latest industrial market briefing.
The city’s favourable outlook comes amid three significant portfolio sales that are expected to transact in the first quarter of the year.
The portfolios, put to market late last year by JP Morgan, Goodman and Charter Hall, are worth more than $650 million combined.
And with investors still with cash to splash, the only thing that may hinder the number of industrial deals this year is a lack of properties to buy, Savills’ report says.
“The weight of funds from local REITs, coupled with overseas capital seeking to grow their portfolios, continues to place upward pressure on values, causing both prime and secondary yields to tighten over the fourth quarter of 2015,” it says.
“Transactional activity is expected to remain relatively strong into 2016 as unsatisfied capital continue to seek investment opportunities. However, a lack of investment opportunities will collar activity.”