Investors buy almost $16b worth of assets: CBRE

The highest-ever annual investment sales in Australia were recorded last year with investors buying almost $16 billion worth of income-generating industrial and logistics assets, according to new research by CBRE.

The occupier take-up has hit 4.2 million sqm and has driven the vacancy rate to a record-low of 1.3 per cent.

National midpoint yields for super prime grade assets were also documented as the lowest ever at 4.50 per cent.

Occupiers have absorbed 4,200,000 sqm of floorspace. This is up from 2020’s benchmark of 3,300,000 sqm and has driven the national vacancy rate to a new record-low of 1.3 per cent.

“Demand from investors and occupiers alike drove Australia’s industrial and logistics sector to new heights in 2021, with records smashed on a host of key metrics,” Sass J-Baleh, CBRE’s Head of Industrial and Logistics Research Australia says.

“Given investment sale transaction volumes had only ever surpassed $5 billion three times before, and peaked at $7.2 billion, the result of $16 billion in 2021 is ground-breaking and demonstrates the strong demand for Australian industrial and logistics assets from local, regional and global investors.”

During 2021, over $10 million income-producing assets were sold in Australia for $15.9 billion.

This is just over three times the 10-year average annual transaction volume of $4.2 billion, and more than double the previous record of $7.2 billion which was set in 2016.

“Institutional investment appetite continues to favour I&L due to high quality covenants in those institutional-grade assets and confidence in the ability to collect income, with multiple domestic and offshore capital sources competing to elevate capital allocation to the strongest performing sector,” Sass says.

Melbourne had the highest occupier take-up of Australia’s five major cities with 2,000,000 sqm of floorspace. This is roughly half of the national total.

Occupier take-up of space in 2021 was up by almost 900,000 sqm compared to the previous record set in 2020. The figure of 4,200,000 sqm is about double the 10-year average of 2,400,000 sqm.

“The national average vacancy rate has been trending down over the past three years and is now at a record low,” Sass says.

“We expect vacancy to remain stable throughout 2022, and that leasing transactions will remain in line with or below the long-term average, as a shortage of available supply continues to shape the market.

“Although the forecast new supply for 2022 matches the 10-year average for occupier take-up, the shortfall in recent years has generated significant pent-up demand for space.”

The vacancy rate fell nationally from 2.2 per cent to 1.3 per cent during 2021 following 1,800,000 sqm of floorspace going online, with a further 2,700,000 sqm forecast for 2022.

Australia’s e-commerce penetration rate continues to rise. It now accounts for 14.3 per cent of total spending with groups involved in ecommerce accounting for 19 per cent of the 800,000 sqm of take-up space in 2021.

Perth led the way on both average net face rents which increased significantly, and midpoint yields which contracted in all five major cities. It had a 5.6 per cent rental increase and 115 basis points yield fall year-on-year.

Super prime average rents grew by 4.4 per cent year-on-year during 2021. Prime rents grew by 7.7 per cent and secondary rents by a record 12.0 per cent.

Midpoint super prime yields across Australia now sits at 4.50 per cent, compressing 56 basis points throughout the year. It now sits at a record 40 basis points lower than the office sector of 4.90 per cent as of the fourth quarter in 2021.

“Lockdowns in the second half of 2021 continued to accelerate the major growth trends for industrial and logistics, as more consumers took their shopping online,” Sass says.

“The transport, postal and warehousing sector finished 2021 as the most-active sector, followed by a wholesale and retail traders, that cross-section accounting for 69 per cent of the Q4 leasing activity.

“We expect rents to grow at an ever-stronger rate in 2022, in excess of five per cent [year-on-year],” Sass says.

For more information on CBRE, click on here.

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