Demand for industrial and logistic property is reaching a fever pitch, leading to the lowest level of vacancy rates in some years in key markets across the country.
In Sydney the industrial and logistics market is now the tightest in Australia, with the vacancy rate sitting at 1.40 per cent after halving over a six-month period.
Behind Melbourne and Brisbane in the second half of 2020 with a 2.79 per cent vacancy, Sydney moved to the top of the order across the six months from the fourth quarter 2020 and the first three months of 2021, according to new CBRE data.
Melbourne’s vacancy rate fell from 2.55 per cent to 1.55 per cent across the same period.
“Strong consumer demand, massive infrastructure projects and accelerated e-commerce adoption have all contributed to a first quarter boom in the NSW industrial market,” Michael O’Neill, CBRE’s western Sydney managing director, industrial & logistics, said.
“Rents have remained steady; however, incentives have tightened by 2 per cent to 4 per cent and this trend is expected to continue as vacancy approaches 1 per cent.”
For Victoria, vacancy in the east and south-east region is at an all-time low, resulting in rents being driven upwards and incentives falling, according to Stephen Adgemis, CBRE industrial & logistics senior director.
“For the first time, we’re seeing rental proposals of $100 per square metre, while incentives have fallen from 30 per cent a year ago to 10-20 per cent.”
This demand has led to large valuation gains for the listed real estate investment trust landlords and brokers predict the sector will be the stand out in this financial year.
Goodman has led the charge with its recent deal in Paris to develop a 90,000-square-metre warehouse with 10,000 square metres of office space with HAROPA PORT, which is the fifth largest north-European port complex.
It is a major coup for Goodman and will be constructed over four levels, linked directly to the Seine river and targeting the development of river transport and urban distribution for the Greater Paris region.
Growthpoint Properties said its portfolio value soared 7.7 per cent in the past six months. The industrial and office property manager said the book value of 45 of its 55 properties rose $251 million on draft valuations, adding about 33¢ per security to net tangible assets that stood at $3.82 per security at the end of last year.
Growthpoint’s managing director Timothy Collyer said the upward trend was the “largest six-month increase on a like-for-like basis in the group’s history”.
“The significant uplift reflects the substantial re-rating that has occurred across the industrial sector, driven by continued strong domestic and offshore investors’ demand for industrial assets, as well as leasing success across both our office and industrial portfolios,” he said.
Another real estate trust, Charter Hall Long WALE REIT (CLW), also reported a significant rise in the book value of its portfolio, boosting the portfolio from $4.9 to $5.3 billion.
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