Perth’s I&L sector back in favour with investors


Perth’s I&L sector back in favour with investors

CBRE’s new Investor Intentions report April 2021

Perth’s industrial & logistics assets are set to top investors’ wish lists in 2021 amid the sector’s ranking as the most sought-after property class. 

 

CBRE’s new Investor Intentions survey highlights that 69% of Australian respondents expect to be more acquisitive in 2021 relative to last year, with Industrial & Logistics assets at the top of their buy list.

 

In 2020, Industrial & Logistics was the only sector to record an increase in sales volumes in Australia (+13%), as activity dipped across the office, retail and hotel asset classes.

 

CBRE Senior Research Analyst Nicholas Volk said COVID-19 had shifted the investment paradigm throughout the globe, highlighting the importance of holding well-located, quality product, with income secured by blue chip covenants. 

 

“With substantial amounts of capital on the sidelines waiting to be invested, combined with suppressed transactional volumes in 2020, 2021 is culminating into a larger year for purchasing activity,” Mr Volk explained. 

 

Mr Volk said Perth presented an attractive value proposition against eastern seaboard markets. 

 

“Perth’s industrial and logistics market represents an outstanding investment opportunity, with a yield spread of 90 bps compared to the 20-year average of 79 bps for super prime product. For prime assets, the spread narrows to 73 bps, compared to 52 bps,” Mr Volk said. 

 

“Given the current demand for industrial assets and the reignition of belief in the Perth recovery story, it is expected that Perth yields will compress in line with long-term average spreads to the east coast.” 

 

CBRE’s Head of Industrial & Logistics for Western Australia, Jarrad Grierson said a shortage of opportunities for quality industrial assets around the country would ignite competitive buyer demand for stock in 2021. 

 

“Demand for assets, particularly in Perth where the majority of the market is privately owned, will provide an attractive financial backdrop – helping maintain competitive yields and pricing,” Mr Grierson explained. 

 

“Highlighting the growing momentum is the announcement of the market-setting transaction of Blackstone’s $3.8 billion Milestone Logistics portfolio to ESR. With 15% of this portfolio located in WA, bidding depth and pricing will highlight the demand for industrial property at scale.” 

 

On the back of an increasing number of tenant briefs in the market and strong absorption of existing vacancies, Perth’s industrial leasing market is also expected to have a positive year in 2021.

 

Incentives over the first quarter fell by 200 bps to 10%, setting a platform for further effective rental growth over the balance of the year, particularly from a face rental perspective.

 

Having declined since the mining downturn, upward pressure is being placed on face rents again given falling vacancy, limited new land supply, especially in the core precincts, and solid macroeconomic fundamentals with a performing resources sector and strong ecommerce tailwinds.

 

Mr Grierson commented: “We expect to see positive demand for further floorspace required by many industries in response to onshoring and bulking up supply chains and inventory levels, which will be marginally offset by greater use of warehouse volume and technology. 

 

“Having stabilised over the course of 2020, leasing metrics are forecast to begin an upward trend in the second half of 2021.” 


Download the full report here

 

 

For Australian/international news or global stories, follow us on Twitter: @cbreAustralia

            

 

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2020 revenue). The company has more than 100,000 employees serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of 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.


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