Australia’s industrial sector had a record-breaking year of sales with more than $12 billion worth of transactions in the past 12 months.
Savills research analyst Sami Ayoub said there was strong capital value growth and yield compression across the sector with sustained investor demand.
“The last 12 months saw over $12 billion of industrial sales (above $5 million) across 217 transactions, many of which consisted of portfolio sales as institutional investors acquired prime industrial facilities to be buried into core portfolios,” Ayoub said.
“This was the highest volume of sales, in dollar terms, on record and well above the 10-year average of $5.6 billion.”
Ayoub said well-located warehouse and logistics facilities servicing densely populated areas were attracting investors, particularly on Australia’s east coast.
Supply chain constraints have renewed focus on industrial assets to compensate for the “just in time” production model and accommodate safety stock according to CBRE’s Global Industrial and Logistics Market update.
There has been a dynamic shift in warehousing demand following the exponential growth in ecommerce penetration, and supply chain issues during the pandemic.
Businesses have shifted gear to expand their network inventory, diversify sources, boost their local inventory and warehousing needs, and increase inventory of critical products, according to CBRE’s head of logistics and retail research Kate Bailey.
Ecommerce penetration will push online retail globally to $3.9 trillion by 2025 and warehousing demand will increase 66 per cent in the Asia Pacific region according to CBRE, which is an extra 72 million square metres by 2025.
Bailey said about 350,000sq m of new industrial space would need to come to market each year to accommodate the growth in ecommerce in Australia.
But it is not just traditional warehousing, it would also need to comprise last mile hubs, parcel lockers, and repurposed retail facilities.
CBRE forecast world merchandise trade volume would increase 8 per cent in 2021.
This will put further pressure on congested global shipping networks which a Turner & Townsend International construction market report indicated were at record levels.
“There are record volumes of freight moving through ports around the world and this is resulting in severe port congestion, surging freight costs, equipment shortages and higher priced goods,” the report stated.
“In some cases, the cost of shipping containers has quadrupled, and the issue is being exacerbated by delays in offloading ships in port due to Covid-19 restrictions.”
CBRE forecasts long term yield compression would continue its downward trajectory, while demand for cold storage would continue to increase with the growing popularity of online grocery shopping.
Hear more about this booming asset class at The Urban Developer’s Industrial and Logistics vSummit on July 29. For more information click here.