Private Capital Surge Fuels $500m Industrial Sell-Off

Charter Hall has capitalised on surging private investor demand for small-scale industrial assets, successfully divesting $500 million worth of properties over the past 18 months despite broader market adjustments.

The sales, spanning 25 assets across five states and territories, achieved an average initial yield of 4.2 per cent and exceeded book values by 4.7 per cent.

The transactions align with a broader market trend of private capital emerging as a dominant force in industrial property investment, accounting for 53 per cent of transactions by value in 2024.

Charter Hall industrial and logistics chief executive officer Richard Stacker said demand for industrial and logistics assets continued to outpace supply.

“The strength of these sales and ongoing tenant demand demonstrates this is also the case at the smaller end of the market, despite the challenging economic backdrop,” Stacker said.

The transactions, in New South Wales, Queensland, Victoria, South Australia and the Australian Capital Territory, benefited from the sector’s tight vacancy rate of 2.5 per cent nationally.

According to CBRE’s latest report, that remains one of the lowest levels globally, despite recent increases.

“We have been able to capitalise on this demand, executing our long-term strategy of divesting smaller, non-core assets to deploy into modern, large-scale assets that meet the needs of our national tenant customers,” Stacker said.

The strong buyer response mostly came from private purchasers, reflecting a significant shift in the market.

According to Cushman & Wakefield research, private capital investors have increased their average transaction size by 53 per cent from last year to almost $35 million, with multiple deals between $50 and $100 million.

▲ Charter Hall industrial and logistics chief executive officer Richard Stacker.

Charter Hall’s divestments came as national industrial vacancy rates rose from a historic low of 0.6 per cent in early 2023 to 2.5 per cent by late 2024.

However, as CBRE notes, that remains well below the 4 per cent ‘equilibrium’ level, suggesting continued strength in the sector.

Industry experts predict the sector will continue to attract private capital due to its high risk-adjusted returns and structural tailwinds supporting demand and asset performance.

Charter Hall’s divestments are part of its strategy to focus on higher-quality core industrial assets, particularly as investors increasingly value tenant security in the consumer staples sector.

Market fundamentals across Australia’s major industrial hubs support that. Melbourne leads the nation’s three largest markets with 29.7 million square metres of capacity and continues to demonstrate resilience, particularly in the south-east where vacancy rates remain tight at 1.6 per cent.

Sydney’s market of 23.1 million square metres maintains a steady performance with a 3.95 per cent vacancy rate, while Brisbane’s 13.6 million square metre market shows strong growth potential driven by population trends.