The industrial property market has experienced 12 months of strong growth to become one of the most sought after asset classes, according to CBRE’s ‘2014 Q4 Industrial MarketView’ report.
Investors are taking advantage of favourable conditions and seeking to diversify their property portfolios, says the report, with super-prime industrial properties particularly popular.
Large portfolios accounted for a substantial proportion of the $5 billion in industrial property transacted during 2014. The largest was the Inghams portfolio, with the industrial portion transacting for $299 million.
According to CBRE senior research manager Mark Lafferty, the rise of portfolio sales in 2014 was partly due to the need for size to satisfy increased capital allocations to the industrial sector.
“Portfolios also allowed investors, particularly offshore groups making their initial foray into the Australian property market, to make large-scale purchases,” he said. “From a vendor perspective, growth in demand for portfolios with scale allowed them to divest a larger number of assets they deemed as non-core in one transaction, in order to free up capital.”
The report identifies several factors as contributing to the appeal of industrial assets.
Traditional logistics assets are appealing to local investors due to their long lease profiles, fixed income growth and corporate tenant profiles. At the same time, the increasing familiarity of global capital markets with the Australian industrial market, and reports of strong returns, is contributing to a surge in transaction activity by foreign investors, thereby boosting activity and confidence.
“At the start of 2014, offshore groups were being outbid by domestic investors,” Lafferty said. “However, in Q4 this was not the case, with four purchases at yields of less than 7 per cent made by foreign buyers.
“The sharp yields in the super-prime space being driven by offshore groups has the potential this year to see domestic buyers focus on prime and secondary assets, especially those with either rezoning or redevelopment potential,” he added.
Download the full report – Here