Inland Rail project to impact industrial market: report

The Melbourne-to-Brisbane Inland Rail project is anticipated to transform the movement of freight around the country and significantly impact industrial property, its users and providers across regional Victoria, New South Wales and Queensland, as found by research carried out by commercial real estate company, Colliers International.
According to the findings of the Colliers Radar: The Melbourne – Brisbane Inland Rail report, the 1,700km Inland Rail project – planned for completion in 2024/25 – is expected to result in potential creation of new intermodal facilities and transport and logistic hubs in key strategic locations; the relocation and/or emergence of inter-capital freight users to key strategic locations; potential uplift in industrial land values for precincts in proximity to the rail route (occupier-led demand); and higher importance placed around the existing Ports of Brisbane and Melbourne.
“From commercial property perspective, the regions which are most likely to benefit from the completion of the Inland Rail are Darling Downs, Acacia Ridge and Bromelton in Queensland, Tottenham in Victoria and Parkes in New South Wales,” said Malcom Tyson, Managing Director – Industrial, Colliers International.
“We are likely to see increased activity along the Inland Rail route from the inter-capital freight users such as Linfox, CEVA Logistics, Toll Holdings, DB Schenker, DHL, Woolworths, Coles, GrainCorp, Bluescope and Visy.”
Tyson noted that the benefits for these users would range from operating cost savings, time savings, improved reliability, improved availability and resilience to incidents.
“In line with this, providers of the intermodal transport and logistic hubs and industrial estates may also emerge to cater for the increased demand and relocation requirements from these users,” he added.
“These providers might fall into service industry sectors such as cold-store warehousing, grain and commodities storage, rail maintenance, container park, food processing facilities, freight handling facilities, distribution centres and inland container storage facilities.”
Matthew Frazer-Ryan, National Director – Industrial, Colliers International, added, “There is compelling evidence pointing towards the positive correlation between new infrastructure projects (i.e. when committed and under construction) and associated uplift in industrial land value in a region.
“The importance of these projects to improve accessibility of freight to the area is also likely to positively impact on the potential rental value of the industrial property in the region.”
Frazer-Ryan added that this has been evidenced Melbourne during the CityLink Tulla Widening project and the beginning of the West Gate Tunnel project – directly impacting transport and logistic operators in the region and leading to an uplift in values.
In Brisbane, he added, this was evident with the completion of the Gateway Upgrade, which saw land values in the Australia TradeCoast rise upon announcement of the project.
In Sydney, the Westlink M7 Motorway construction saw average annual land value growth in the M7 catchment area of around 22 per cent over the three-year period.
“As a result, we would anticipate that as firms begin to look to these middle suburban ring and outer regional areas supported by the completion of the Inland Rail, stronger demand should lead to increasing land values and overall industrial property performance over the long-term,” added Frazer-Ryan.

New tenant for NSW industrial development, Calibre

Mirvac Group has announced it has signed kitchenware wholesale business Sheldon and Hammond at Calibre, its industrial development at Eastern Creek in New South Wales.
Sheldon and Hammond has signed a ten-year lease for a 31,000m2 facility at Calibre, with construction due to have commenced during September 2017. The building comprises high clearance warehouse space and office space and an outdoor courtyard.
Sheldon and Hammond is an importer and distributor of home and giftware brands.
Mirvac Development Director, Industrial, Fabian Nager, said Sheldon and Hammond was seeking to consolidate its existing facilities in a strategic location, into a new purpose-built facility that reflected the quality of their offering and would support the evolution of the company.
“The high quality and flexible design of this facility will cater to the growth that Sheldon and Hammond’s business is experiencing across Australia.”
Located at the junction of the M4, M7 motorways and the Great Western Highway, Calibre’s location places Sheldon and Hammond at the centre of Australia’s supply network, with access to key freight routes through a multi directional signalised intersection constructed at the entry to the Calibre estate.
Ken Angus, Managing Director, Sheldon and Hammond, said, “We chose Calibre, Eastern Creek not just because of its great location but because of the confidence we have in Mirvac delivering our facility on time and to a very high quality standard, which will be complimentary to our corporate brand.”
“At Calibre, we’re continuing to push the boundaries of standard office and warehouse options, creating facilities that deliver long-term efficiencies for our customers and our portfolio,” said Nager. “As Australia’s supply & logistics, retail and manufacturing sectors adapt to current market changes, we’re delivering assets that help future proof our tenant’s businesses.”
Sheldon and Hammond joins supply chain management company CEVA Logistics who relocated to Building 1 at Calibre earlier this year.

Investment group to acquire Coates Hire

Investment group Seven Group Holdings (SGH) has announced that it has entered into a binding agreement to pay $517 million to acquire the remaining 53.3 per cent of securities in equipment hire company Coates Hire that it does not already own, from an affiliate of Carlyle Asia Partners II, a fund managed by The Carlyle Group, and minority owners.
SGH said in a media statement that the Coates Hire acquisition reflects its continued focus on becoming “the leading operator of industrial services businesses in Australia” and driving efficient capital allocation across its portfolio.
“The Coates Hire business is led by a strong and experienced management team, with a number of business improvement initiatives in place and already delivering results,” the statement continued.
“Full ownership of Coates Hire will enhance SGH’s portfolio with increased exposure to industrial services.”
Ryan Stokes, Managing Director and CEO, SGH, said: “We are pleased to reach agreement with Carlyle to acquire the shares in Coates Hire we don’t already own.
“We have had a long history with the Coates Hire business and believe with the visible market opportunity associated with East Coast infrastructure activity, along with the current performance of the business and management team, the company is extremely well positioned to create value for all shareholders.
“The move to full ownership of Coates Hire will enhance SGH’s position as a leading operator of industrial services businesses, with a strong macroeconomic environment and a positive outlook providing the potential for significant opportunities to be realised.”
The transaction is subject to satisfactory waivers being obtained from Coates Hire’s existing lending syndicate.
 
 

Mirvac constructing new Sydney industrial facility

Property developer Mirvac Group has announced the commencement of construction on ‘Building 3’ at the Calibre industrial estate at Eastern Creek, Sydney, with the office and warehouse facility being delivered on a speculative basis.
The building will offer workspaces between 6,000 and 20,000m2 from December 2017.
The company noted that a key driver for the delivery of Building 3 has been the increasing growth of e-commerce or ‘eTailing’, a movement fuelling the uptake of industrial property in Australia.
“Industrial leasing activity to retail tenants within Western Sydney is tracking at approximately double the 10-year average since the beginning of 2016,” said Fabian Nager, Development Director – Office and Industrial, Mirvac. “As demand rises for online goods and services among the Australian population, e-commerce businesses are looking to secure strategically located, functional and flexible warehouses to improve operational efficiencies and future-proof their businesses.
“Building 3 has been designed for the evolving nature of the industry, with a focus on occupier amenity and enabling the use of current and future logistics technology. We have included a number of key future proofing initiatives, such as concrete floors that are capable of supporting nine tonne point loads, and a 20-metre cantilevered awning spanning the length of the building that will maximise all-weather functionality.”
Gavin Bishop, National Director – Industrial, Colliers, added, “Design considerations for modern industrial estates must include an increased use of robotic and mobile automation, greater cubic capacity and a quality indoor working environment.
“The current demand for fast-moving, online retailing is driving a new level of sophistication in industrial facilities that are in close proximity to key infrastructure, with market-leading technology, high levels of amenity and advanced operational specifications. The construction of Building 3 at Calibre responds to this trend and will offer a premium solution for a corporate headquarters and warehouse facility or a third-party logistics provider.”
 

VIC storage leasers may be eligible for refund

Companies leasing warehouse facilities in Victoria may be entitled to a refund from their landlords thanks to a recent decision made by the Victorian Supreme Court of Appeal.
Essentially, the Court held that the lease of premises used to provide cold storage and logistics services was a ‘retail lease’ for the purposes of the Retail Leases Act 2003 (Vic), Hunt & Hunt lawyers has shared.
Hunt & Hunt noted that the decision has practical implications for warehouse operators and freight forwarders, making many entitled to repayment of expenses including land tax and repair costs going back six years.
The Retail Leases Act impacts all aspects of the formation, operation and ending of covered leases. In terms of costs for tenants, landlords are not able to pass on land tax liability or legal costs associated with the preparation of leases, and
landlord are responsible for maintaining premises in the same condition as at the beginning of the lease, this includes equipment, appliances and fittings provided on the premises under the lease.
For the case that brought about the decision, IMCC Group (Australia) Pty Ltd v CB Cold Storage Pty Ltd [2017], the Court had to consider whether a lease of premises used to operate cool storage facilities would be classed as a retail lease.
“The landlord argued it was not due largely to the nature of the services provided and the fact that almost all of the tenant’s customers were businesses,” Hunt & Hunt shared. “The Court of Appeal held that the lease was a retail lease and took the following factors into account: any person could purchase the storage services if the appropriate fee was paid; the tenant’s business was open during normal business hours; and the tenants customers were the actual consumers of the storage service.”
The Court was reportedly not concerned that the premises were acquired for a business purpose.
Hunt & Hunt advises that the criteria for ascertaining whether a warehousing and logistics business’ lease is eligible to be classified as retail will include the rental amount, the size of the premises, whether customers can attend the premises, the hours of operation, the services provided and the permitted use of the premises under the lease.
“Every tenant that provides warehousing and logistics services should have their lease reviewed to determine whether it is potentially a retail lease,” Hunt & Hunt noted. “If it is a retail lease under the law, but the tenant has been paying land tax and maintenance and essential safety maintenance costs, there may be a very strong case to demand repayment of those costs from the landlord.”

Melbourne Port increases rent 750 per cent

One of the world’s biggest stevedoring companies has been hit
with a massive rent increase which will make the Port of Melbourne the most
expensive port in the world.

DP World managing director Paul Scurrah said the rent
increase was around 750 per cent.

“I thought there was a decimal point missing when I saw
the rent increase for the first time, and there needs to be common sense
prevailing around any increase in rental,” he said.

“We have had rental increases before and there is
provision in the contract to negotiate rental fees every two years, but an
increase of this size will cause job losses and may see shipping companies
avoid using the Port.

The rental increases at the Port of Melbourne have caused
concerns to be raised by The Australian Logistics Council (ALC), the peak
industry body for freight logistics industry.

Managing director Michael Kilgariff said ALC was generally
supportive of the Port’s long term lease as a way of unlocking much needed
funds for logistics infrastructure in Victoria, but that rental increases would
undermine supply chain efficiency by affecting the ability of industry to make
long-term commercial decisions about their operations at the port.

“Any proposed rental increase, particularly of this
magnitude must be visible and transparent, and we are concerned that proposed
new rents at the Port of Melbourne appear to be linked to rents allegedly paid
by new entrants to the stevedore market,” he said.

“The reported price paid by Melbourne’s third stevedore to
secure port space should not directly impact on the price asked of legacy stevedores
to operate at the port.

“This issue has been raised repeatedly by senior members of
the logistics industry.

“This matter highlights the need for the
logistics industry to be engaged in all consultations with government on the
future lease of the Port of Melbourne, including arrangements for pricing,
lease structure and proposed regulatory frameworks.

“Too often in the past when these processes have commenced,
the logistics industry has been locked out of discussions on the grounds of
‘probity’.

“The Victorian
Government has committed to involving the logistics industry in this process
and this matter reinforces how important it is for that to occur.”

Kilgariff said the focus needs to be on the efficiency of
the entire supply chain for Melbourne to maintain its claim of being
Australia’s freight and logistics capital.

“As ALC said in its submission to the Senate Inquiry into
asset recycling, the need for a published business case in relation to proposed
infrastructure projects is paramount to building community support for them,”
he said.

Kilgariff said the issue would feature at the upcoming ALC
Forum 2015 on March 11, when senior logistics executives will discuss
regulatory and investment issues relating to the port, rail and intermodal
sectors of the industry.   

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