Industrial property in high demand across logistics industry

Industrial property continues to be in high demand in the transport and logistics industry.
According to Fairfax, various multi-million projects are currently underway in both Sydney and Melbourne, with a $169.3 million sale to Frasers Logistics & Industrial Trust the most recent example.
The sale, which Frasers referred to as a ‘restocking’, covers a diversified portfolio of seven major industrial assets, spread across the eastern seaboard.
According to Fairfax, it comprises four completed properties and three properties under development, has a weighted average lease expiry of 9.6 years and all properties are fully leased or pre-committed.
“Twenty per cent of the assets are in Sydney, 60 per cent in Melbourne and the remainder in Brisbane,” Fairfax reported.
Meanwhile, Stockland started work on a $80 million office and warehouse estate in Warwick Farm, close to the Hume Highway, M5 and M7 motorways and near the Southern Sydney Freight Line and future Badgerys Creek Airport.
The company had only recently redeveloped two warehouse facilities in Melbourne to turn them into a ‘logistics offering’.
Fairfax quoted Michael Fenton, the Australian head of JLL, an American professional services and investment management company specializing in real estate, as saying that the markets continues to set new records every year.
2016 volumes reportedly reached $6.89 billion, surpassing last year’s all-time high. Portfolio transaction volumes have grown 155 per cent per annum since 2013, Fairfax noted.
“Sydney and Melbourne will still be considered as high-growth markets, however pricing will be accordingly sharp,” Fenton told Fairfax.
“In these markets, secondary yield compression hasn’t occurred to the same intensity as that in the prime over the past few years. As such, some assets will have a greater margin to absorb further rises in bond rates. JLL believes yield spreads in Sydney and Melbourne will narrow in the near term.”