Domestic and offshore investors are increasing their focus on the industrial property sector as yields compress in the super prime market, new research reveals.
CBRE Australia senior research manager, Mark Lafferty, reported that there has been a firming of demand for industrial assets in recent months, which has led to increased competition for properties, particularly in the super prime sector.
Lafferty said recently released Real Estate Investment Trust (REIT) results highlighted the growing interest in industrial property among domestic investors.
“Charter Hall increased its exposure to long WALE (weighted average lease expiry) industry assets, resulting in industry funds under management increasing by 18 per cent over the last six months, growing the overall industrial proportion of the property portfolio by 1.5 per cent,” he said.
“GPT’s focus on its logistics portfolio has seen its industrial asset base grow by 62 per cent since December 2011, from $832 million to $1.35 billion in December 2014.
“Stockland increased its logistics weighting from 12 per cent ($916 million) of total portfolio in December 2013 to 19 per cent ($1.6 billion) in December 2014.”
While offshore investors have increased their focus on the industrial property sector, with foreign purchases of industrial assets in 2014 representing seven per cent of total foreign commercial property sales compared to 0.01 per cent in 2013.
“Our observation is that diverging investment needs and requirements present opportunities for both domestic and international investors,” Lafferty said.
“Offshore investors are looking for defensive assets in the Australian marketplace to generate long-term income. They are attracted by Australia’s yield and income stability and don’t perceive a large risk to capital values [for high quality assets].
“Domestic investors may look to recycle capital, realising capital gains from high quality asset portfolios to pursue value add opportunities.
“Onshore investment mandates are being broadened to include both non-core and regional locations.”
