Could this be another record-breaking year for the industrial sector?
Australia's industrial property sector is seeing unprecedented growth with transactions and rental prices seeing all-time highs.
“Industrial is the only sector to benefit from the pandemic...the transaction volumes that we’ve seen across markets has been huge," says JLL Senior Director of Research Annabel McFarlane.
Australia’s industrial sector had a record-breaking year of sales with more than $8.86 billion worth of transactions in the past 12 months, well above the 10 year average of $5.2 billion according to Savills.
On the leasing front, Colliers reports that leasing activity has seen a sustained growth in Q1 of 2021, with an approximate 1,000,000 sqm gross take up recorded.
This represents a third of activity recorded in 2020 with the trend likely to lead to a record take up this year led by Sydney and Melbourne markets.
Riding on the surge of ecommerce and online retail growth in the last 12 months, investors are flooding into the industrial property sector to take advantage of rising demand.
“There’s $45 billion of capital waiting to get into the market … that’s six or seven times what is required right now,” says Centuria Industrial REIT fund manager Jesse Curtis.
Access to funding is now more certain with the diversity in financial lenders who are well capitalised, providing choice in lending options.
“Both banks and non-banks have increased appetite for lending to this asset class, but you have large variances in both pricing and conditions available,” says Darren O’Hanlan, Director of Ocian. “We have recently achieved amazing terms for clients, for development finance across strata warehouse, storage and big box projects.”
Industrial developers are also looking to bank in on the demand. Australia will be adding 2.4 million sqm of industrial real estate to meet demand.
Developers are getting creative in developing existing assets, considering the needs of the various sub-sectors driven by e-commerce but also increasingly the life-sciences sector including pharmaceutical and biotechnology.
Undeveloped and underutilised assets are being rejuvenated and precincts are being rezoned to cope with the short supply.
What was previously an unattractive investment compared to residential and commercial properties, the industrial sector is clearly seeing the light of day and will likely maintain its upward trajectory in the next few years.
“Ocian is highly active in the industrial property finance market. We have seen a shift from many developers and investors into this defensive asset class, with the continued growth of ecommerce and logistics,” says O’Hanlon.
Please reach out to Ocian to discuss your upcoming industrial development, or acquisitions, and we can quickly run you through the best funding options available in market.