Industrial property yields tighten as demand grows

Industrial property asset owners can expect yields to compress over the course of 2015, as demand for "super prime" properties rises, according to CBRE Research.

The property service provider reported that offshore investors had outbid domestic buyers for a number of assets in the second half of last year, pushing yields below seven per cent, with 225 properties changing hands for a post-global financial crisis dollar value high of $5 billion.

Of the $5 billion of sales, more than 20 per cent came through the sale of eight portfolios, which "allowed investors, particularly offshore groups making their initial entry to the Australian property market, to mark large scale purchases".

While CBRE identified the emergence of demand for industrial assets from offshore investors, the report said that "these groups, in the first half of 2014 were being outbid by domestic investors".

"This was not the case in Q4, with four sub-seven per cent yield purchases being made by offshore groups," CBRE said.

VIEW ALL

View all

"The sharp yields in the super prime space being driven by offshore groups has the potential in 2015 to see domestic groups focus on prime and secondary assets, especially those with either re-zoning or re-development potential."

While the report said yields would tighten as the result of increased demand for industrial properties, it forecast that rents would rise by 1.5 per cent this year, with stronger growth expected in 2016 (2.1 per cent) and 2017 (2.4 per cent).