Occupier demand for industrial & logistics facilities remains high for global investors. Australia’s investable industrial property space has been estimated at $90 billion and most investors in the sector are looking to build a portfolio of between $1.0 billion and $1.5 billion.
Global investors have identified Australia as an important market for deploying core capital, in a recent survey by JLL of 38 global investors collectively holding close to $2 trillion of assets under management.
Half of all respondents plan on increasing their exposure to Australia by the end of 2021. Given the strong underlying drivers for logistics real estate, 81 per cent of survey respondents plan on increasing their exposure to this sector by the end of 2021.
JLL’s Head of Capital Markets, Industrial and Logistics – Australia, Tony Iuliano said investor demand for modern logistics assets has remained firm with multiple capital sources seeking to enter Australia or increase their industrial & logistics exposure.
Tony believes Australia’s e-commerce penetration has accelerated through COVID-19 and has the potential to increase further. “The delivery and storage of these goods is one of the ingredients supporting occupier demand for industrial & logistics facilities,” he said.
“One of the challenges for investors wanting exposure to the Australian industrial & logistics sector is size of the investable universe. We estimate the investable universe is approximately $90 billion and most investors in the sector are looking to build a portfolio of between $1.0 billion and $1.5 billion.”
With an expected recovery over the next six to 12 months, many global investors have identified Australia, Japan, South Korea and China as the markets most likely to observe an increase in transactional activity into 2021.
According to Fergal G Harris, Head of Capital Markets – Australia at JLL long-term economic growth projections are strongest for the Asia Pacific region.
“Investors are seeking exposure to markets where they can generate strong risk-adjusted returns. Australia’s high level of transparency and low volatility of returns make it very attractive for core investors wanting exposure to the Asia Pacific growth story,” said Fergal.
In the third quarter of 2020, an unpredictable environment remains the biggest challenge in deploying capital, say investors.
Approximately 60 per cent cited uncertainty as driving a pause in their transaction activity. Specifically, underwriting assumptions, rent assumptions, vacancy forecasts, cost of capital and pricing uncertainty were cited as the primary reasons stopping investors deploying capital in the current environment.
As investors review their Asia Pacific strategies, JLL expects investors are planning to increase their exposure to logistics, planning to retain or increase their exposure to the core sectors, such as offices, by the end of 2021 with only 6 per cent expecting to reduce their exposure.