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Eight-Property Buy Takes Centuria’s Industrials to $5bn

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Centuria has raced to $5 billion in industrial assets under management after picking up eight properties in urban infill markets in Sydney, Melbourne, Brisbane and Perth.

The portfolio, purchased for $350 million, is anchored by a $200-million super-prime distribution centre in Fairfield, which was secured on a 3.6 per cent yield.

The acquisitions follow a record 15 months in which Centuria’s Industrial REIT fund acquired almost $1.3 billion of data centres, cold storage sheds and other logistics assets, and doubled its leasing activity to 250,000 square metres.

Centuria head of industrial Jesse Curtis said the group’s focus on the sub-sectors had been due to a growing need to onshore operations for supply chain resilience.

“We consider these assets to be under rented with low vacancy and limited new supply continuing to put upward pressure on rents in infill locations,” Curtis said.

“A number of the sites have surplus land, low site coverage and overlapping lease expiries, providing further value-add potential through development, redevelopment or repositioning.”

▲ Centuria has made no secret of its corporate strategy and said it would " continue to see the company purchase new asset classes with a view to up its market dominance."
▲ Centuria has made no secret of its corporate strategy and said it would " continue to see the company purchase new asset classes with a view to up its market dominance."


The group has significantly upweighted its exposure to industrial assets, now 30 per cent of its entire real estate platform, as e-commerce and onshoring of goods continue to act as the key drivers behind a rising demand for warehouse space.

The REIT, now recognised as Australia’s largest listed pure-play industrial fund, holds 167 assets across its ASX and NZX-listed funds and Australia and New Zealand unlisted funds.

During the past financial year the REIT booked a $587 million—or 25 per cent—valuation gain as yields across its portfolio firmed 151 basis points to 4.54 per cent.

“Tenant customers are the backbone of our industrial portfolio and our in-house teams ensure proactive management to prevent downtime and improve leasing outcomes,” Curtis said.

“Testament to this is our partnership with major industrial occupiers such as Woolworths, Visy and Australia Post to provide great outcomes for their property needs.”

Following its merger with Augusta Capital, the group recently secured the NZ$178-million Visy Glass manufacturing facility after the largest unlisted, single-asset capital raise in New Zealand, attracting 820 retail investors.

Centuria’s New Zealand Industrial Fund now manages NZ$550 million of industrial assets and is currently developing a 38,000sq m industrial facility in Kamo, Whangarei, 160km north of Auckland.

It has also continued to pad out its development pipeline with $160 million in new projects on the horizon in Australia and New Zealand.

Where do yields go from here?

Currently about $45 billion of institutional capital is looking for a home with the industrial sector in Australia averaging around $5 billion in trade every year.

Values are continuing to rise and yields are tightening on prime industrial real estate, which is now firming to a position beyond the office sector.

Curtis said the industrial sector, compared to the office sector, now had more attractive characteristics, including less capital expenditure, lower incentives, longer leases and a more resilient tenant base.

According to Colliers, yields have shifted significantly this year with upwards of 50 basis points of compression being recorded within some submarkets over the quarter.

Prime core assets in Sydney and Melbourne are currently trading below 4 per cent in some instances while there are select cases in Brisbane where yields around the 4 per cent are being struck.

This has driven a 10 per cent rise in values, adding about $10 billion to Australia’s pool of investment-grade warehouses, now worth a combined $140 billion.

Further compression is expected over the remainder of the year as a number of assets in the market or in due diligence re-rate industrial and logistics pricing.

According to CBRE, 490,000sq m of new warehouse space will be required per annum over the next couple of years to match the growth of online retailing.

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Article originally posted at: https://www.theurbandeveloper.com/articles/centurias-industrial-portfolio-tops-5bn