The record-breaking performance of Australia’s industrial and logistics market is expected to step up another gear, according to new research from JLL.
Large deals are being struck at a record rate, JLL finds, pointing to two 2021 Australian deals as illustration: ESR and GIC’s US$2.9 billion acquisition of Blackstone’s Australian portfolio and LOGOS’ US$1.3 billion investment in Sydney’s Moorebank Logistics Hub.
According to ANREV, Asia Pacific institutional investors currently have around 66 per cent of their portfolios allocated to office and retail assets, and just 16 per cent and six per cent allocated to logistics and residential assets, respectively.
JLL says the significant rise in capital allocations towards the logistics and industrial sector in Australia has been driven by the robust growth in ‘new economy’ occupiers – those producing or intensely using innovative or new technologies – as we as pure-play e-commerce and third-party logistics providers.
“Australia’s robust investment fundamentals, including a highly transparent market, stable income collection and a strong short-term rental growth outlook, are encouraging more and more groups to look at deploying across our key markets nationally,” says JLL’s head of capital markets for industrial and logistics in Australia, Tony Iuliano.
The challenge for most investors is to access product of sufficient scale. Major portfolios take time and expertise to compile, Iuliano notes, “and when significant opportunities are presented to the market they are always hotly contested”.
Annabel McFarlane, JLL’s senior director for industrial research, says yield compression in some Sydney and Melbourne over the last 12 months has been “unprecedented”. Prime market yields have compressed by up to 100 bps in some parts of Sydney and Melbourne as competition hots up.
McFarlane says these markets, while coming off a higher base than most established global cities, are now moving into the territory of New York, Paris and London.
“Australia’s logistics and industrial investment market has rapidly increased in relevance on the global stage,” McFarlane adds.