Colliers International releases Capital Markets Industrial Investment Review
The Australian Industrial market continues to see high demand from investors, fuelled by appetite for access to our long-term demographic growth prospects.
According to the Colliers International Capital Markets Industrial Investment Review, population growth and infrastructure are the two key factors driving the Australian industrial market.
$260 billion worth of major transport infrastructure projects are under construction or planned across 315 projects in Australia, up from $211 billion across 260 projects only 3 years ago.
Colliers report found that capital values in Sydney have grown by 18%, and in 14% in Melbourne, over the two-year period to December 2018. This capital value growth has been driven by yield compression, with only few sub-precincts – such as Sydney South and Melbourne City Fringe – experiencing any significant rental growth. Both of these markets have been impacted by a reduction in supply, as alternative uses are now providing better returns to land owners.
“While population growth rates will ebb and flow in a cyclical pattern, over the last 10 years there has been a clear upward shift in population growth in Australia,” said Malcom Tyson, Managing Director, Industrial at Colliers International.
Over the year to June 2018, almost 230,000 migrants from offshore decided to call Australia home, with 39% of these people moving to NSW and 37% moving to Victoria, while Queensland continues to be the top state for interstate migrants. These three major Australian cities are expected to remain in the top 10 fastest growing major cities in the developed world.
“It is no surprise then that these states continue to be the focus for investors in the industrial sector. In total 42 per cent of total industrial sales volumes occurred in NSW, and 26 per cent in Victoria and 16 per cent in Queensland,” Mr Tyson said.
“While most of this population growth is concentrated in our 3 major capitals of Sydney, Melbourne and Brisbane, the logistics sector continues to expand nationwide to cater not only for these additional people, but also for the continued gradual shift of consumer preferences to online platforms.”
Throughout 2018 there was a limited amount of industrial stock on the market relative to demand, a direct result of lower investment volumes, the sharp increases in land prices and the tightening of yields across all the major national industrial markets.
“The last 12-months saw solid capital growth across the national industrial markets, with increases in market rents for both primary and secondary stock and increased investor confidence through broader expansionary economic conditions and continued infrastructure spending, “said Simon Andreatta, Head of Industrial, Valuation and Advisory Services at Colliers International.
“The focus on the distribution and logistics sectors has also continued and are expected to remain key drivers across the national industrial markets for the foreseeable future.”
“Furthermore, the current sentiment for large industrial land holdings is at an historic high, being driven by a shortage of land suitable for industrial development.”
“Western and South-West Sydney are prime examples where strong demand from both institutional and private owners, has seen land values increase by up to 60% over the past three years, with the appetite for prime land holdings anticipated to grow.”