Urban Logistics Co—the newish-kid on the last-mile logistics block—will close a deal “within weeks” to acquire two big east coast industrial parks, according to sources close to the deal.
The joint venture between Wentworth Capital (formerly private equity real estate firm NashCap) and a fund managed by the US investment giant BlackRock Alternatives has agreed to pay around $250 million for the pair of properties—one each in Sydney and Melbourne.
The ASX-listed real estate investment trust GPT Group is off-loading the assets.
It is understood contracts have been exchanged for the Citiport Business Park, about 4km west of the Melbourne city centre, which includes a modern low-rise office building and ten warehouses with a total floor area of just under 27,000 square metres.
Also under contract is the Rosehill Business Park, a free-standing industrial facility on the Parramatta River less than 20km west of the Sydney CBD. The GPT website shows it has three big office-warehouse facilities with nearly 42,000 square metres.
A year ago it reported 100 per cent occupancy—not unusual in Australia’s biggest city, where at just 0.2 per cent, Sydney had the lowest industrial vacancy rate of any major city in the world.
That in turn has fuelled record rental increases across most industrial markets.
CBRE head of industrial and logistics research Sass J Baleh said in February rental growth in Sydney and Perth last year was close to an average 40 per cent.
The researcher said the Melbourne vacancy rate had dipped in the past 18 months and was now sitting at about one per cent.
“We've started to see rent growth in Melbourne of 20 per cent, so it is still very, very strong but not as strong as Sydney and Perth,” she said. “And this year we do believe we'll see, if not double-digit growth in Melbourne, at least high single-digit rent growth.”
The two acquisitions by Urban Logistics will bring to 12 the number of assets it counts, and which include at least 40 warehouses.
All are in either Melbourne or Sydney and all were acquired off-market—mainly through private sale and the company’s network of relationships—and all in just over two years, making ULC the country’s biggest last-mile logistics portfolio manager.
That portfolio is now worth more than a billion dollars.
Chief executive Narelle Checchin would not be drawn on the two latest acquisitions but did say they would continue to concentrate on the Sydney and Melbourne markets.
“Yes, we are more focused on the stronger markets of Sydney and Melbourne,” she said.
“From our perspective we’re still seeing good occupier demand there.
“Land constraints and lack of supply we expect will continue to drive rental growth. As you know it takes some time for that growth to flow through, as leases come to an end.
“So we expect that will continue to flow through for some time.”
This month ULC announced it had signed a seven-year lease with third-party logistics provider InterCentral.
InterCentral agreed to take 10,450sq m, which represents about 20 per cent of the total lettable area of ULC’s 10-ha Altona North development about 11km west of central Melbourne.
InterCentral is one of the two existing clients ULC has been juggling as it retains the bulk of the current 40,000sq m, while adding another 12,000sq m in what’s a complex adaptive re-use development.
The completed development will contain seven tenancies of between 5000 and 16,000sq m, each with a dedicated office space and amenities.
Checchin estimates the re-use of existing building elements will realise a 50 per cent saving in carbon emissions.
And ULC says the adaptive re-use project, now under way with Vaughan Constructions, will save 2.7 tonnes of carbon for every tonne of structural steel reused, as well as 106 tonnes of carbon by reusing existing precast concrete walls.
“From an investor perspective, this is definitely becoming more and more a standard requirement,” Checchin said.
“Investors are looking for assets with solid ESD credentials.”
The final stage of the three-stage Altona North development is expected to be completed by August, 2024.
