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Improved fundamentals to drive next wave of industrial & logistics growth

Finance Markets / Latest Activity

Australia

Feb 22 2017

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Melbourne, 23 February 2017 – The industrial & logistics sector has emerged as the surprise performer of Australia’s commercial property market, with stabilising rents and projected growth providing compelling investment conditions for the year ahead. 

CBRE’s Industrial and Logistics, Q4 2016, MarketView report shows strong levels of consumption and investment spending is supporting goods demand in major markets across the country – providing a strong basis for rental growth in 2017. 

In the final three months of 2016, the industrial & logistics sector recorded positive quarterly rental growth of 0.5% nationally, underpinned by strong gains in Sydney. 

CBRE’s Senior Managing Director, Industrial & Logistics, Pacific, Matt Haddon said the latest figures highlighted the beginning of a growth period for the sector. 

“The tide has turned, with the latest quarterly rental growth and projected growth in 2017 injecting confidence into the sector, which, despite mixed economic conditions, has continued to succeed,” Mr Haddon said. 

“It’s well documented that the manufacturing sector is declining – and has been for years. Gains in consumption and investment spending are where our focus needs to lie, with this sector of the market driving future occupier demand growth.” 

The report highlights reduced supply in 2016 is also expected to further stimulate rental growth, with just 433,000sqm released in the December quarter – 34% lower when compared to the same period in 2015. 

On the capital transactions front, Victoria recorded its strongest year on record in 2016, with $1.92 billion in assets changing hands – representing a 15% increase from 2015. 

The report shows $394 million in property transactions during the last three months of 2016 helped propel the Victorian market to its strongest position on record. 

CBRE Senior Research Manager Kate Bailey said a number of high quality assets and portfolio sales had underpinned strong transaction activity in Melbourne. 

“In 2016, there was an imbalance of available premium assets and large scale opportunities to meet demand in most locations across the country – with the possible exception of Melbourne,” Ms Bailey said. 

“Similar drivers were responsible for a slowdown in offshore investment, with portfolio sales the key driver of foreign investment in 2016.” 

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.

New South Wales recorded $1.559 billion for the year, 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. 

“Global capital remains highly focused on this strongly performing segment of the commercial market,” Mr Haddon said. 

Mr Haddon said further compression of yields in major markets during 2016 indicated that investors were anticipating both occupier demand and rental growth in the sector. 

In Q4, super prime average yields compressed a further 10 basis points to reach record lows of 6.9% nationally, driven by a low of 6.0% in Melbourne, 6.1% in Sydney and 6.5% in Brisbane.

Looking ahead, Mr Haddon said current market conditions pointed to a strong year for the market. 

“Current activity levels suggest that an increased number of opportunities will be available for investors in the first quarter of 2017, compared to the same period 12 months ago.” 

 

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2015 revenue).  The company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide.  CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.  Please visit our website at www.cbre.com.

SOURCE: Press Release

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