Australian industrial transaction volumes hit $8.6b YTD

This was boosted by two Blackstone portfolio sales - Milestone ($3.8b) and Kingdom II ($825m). 

The industrial market has gone from strength-to-strength over the past quarter and is well on track for another strong year, notwithstanding recent lockdowns will affect confidence temporarily, says Dexus Research. The online growth story continues to have a profound effect on the Sydney and Melbourne markets with elevated levels of demand from food, furniture and fashion companies looking to establish or expand their online platforms. 

“In the first six months of 2021 take-up from ecommerce-related retailers has been around 20% ahead of average 2020 levels and logistics companies have absorbed around 560,000 square metres of space in key locations in Sydney and Melbourne to service excess demand. Online penetration has increased to circa 13% of total retail sales.”

Here’s more from Dexus Research:

Leasing metrics have significantly improved. Over the past year rent growth has been evident within the Inner West Sydney (+3.4%), Outer West Sydney (+2.6%), West Melbourne (+4.7%) and East Perth (+4.3%) markets whilst other locations have remained relatively steady. Incentives across Sydney and Melbourne markets have decreased in line with high levels of demand and record low levels of vacancy. In the East Perth market, incentives have nearly halved from prior levels. 

Competition to deliver new product to the market continues to place upwards pressure on land values. In Outer West Sydney and West Melbourne markets values lifted by $100/sqm and $75/sqm respectively in the past quarter. 

Investment demand continues to push yields tighter across all markets. Industrial transaction volumes far outpaced all other sectors at $8.6 billion for the year to date, influenced by the two Blackstone portfolio sales - Milestone for $3.8 billion and Kingdom II for $825 million. The portfolios comprising 65 assets across multiple states appear to have contributed to tightening yields. In the quarter, the main Sydney markets compressed an average of 40bps, Perth 63bps, Melbourne 13bps and Brisbane 25bps. 

Appetite for cold storage remains strong with Charter Hall transacting a sale and lease back with PFD Food Services on a yield of 4.9% and another with food manufacturer Patties foods within Victoria at 4.4%.