Victoria’s industrial & logistics sector recorded its strongest year of sales on record in 2016, with $1.92 billion in assets changing hands – representing a 15% increase from 2015.
CBRE’s Industrial and Logistics, Q4 2016, MarketView report shows $394 million in property transactions during the last three months of 2016 helped propel the market to its strongest position on record.
CBRE Director of Industrial & Logistics Rory Hilton said a number of high quality assets and portfolio sales had underpinned the strong transactional activity in Melbourne.
“2016 was a strong year for offshore investment in Melbourne’s industrial & logistics market – with global capital continuing to seek out opportunities that offer scale and quality in key markets,” Mr Hilton said.
“There are unprecedented levels of both domestic and offshore capital seeking industrial assets in all of Melbourne’s core industrial precincts.
“The majority of mandates at present are focusing on super core stock or assets that provide value-add/repositioning angles and are well along the risk curve.”
Melbourne was the strongest performer nationally, with New South Wales recording $1.559 billion in transactions during 2016, followed by Queensland with $537.67 million, $617.2 million in Perth, $146.05 million in South Australia and $31.25 million in the ACT.
Nationally, $4.831 billion in industrial & logistics assets changed hands during 2016 – marginally down from a record $5.267 billion in 2015, due to the available stock shortfall.
CBRE Senior Research Manager Kate Bailey said Melbourne experienced further compression of yields in Q4, moving 10 basis points to 6.0% – reflecting continued demand for high quality industrial assets.
“This change was driven by yields in Melbourne’s south east region, which saw a 25 basis point compression to 5.8% – the lowest in Melbourne,” Ms Bailey said.
Secondary yields in inner locations are expected to continue compressing as investors look to capitalise on the increasing demand for last mile delivery facilities by refurbishing existing assets.
On the supply front, there was 128,000sqm of new stock added in Melbourne during the December quarter – down 53% on the same period in 2015.
A number of notable developments are proposed, including the Target Distribution Centre in Trugganina and the Greens Road warehouse in Keysborough.
Mr Hilton said Melbourne’s strong industrial leasing market would continue to support investment in the sector.
“Strong levels of preleasing and leasing activity in the second half of 2016 are set to flow into the capital markets 2017, underpinning heightened investment in the sector,” Mr Hilton said.
“Top tier logistic, retail and industrial companies are attracted more than ever by Victoria’s impeccable transport infrastructure, the efficiency of Melbourne Ports, high standard of blue and white collar work force – all of which continue to position Melbourne’s industrial and logistics sector as an attractive destination for capital.”