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News release


AUD 771.7m of NSW Industrial asset transactions sold in the final quarter of last year: the highest quarterly value in a decade

With a lack of quality product available yet high demand, strong activity in Australia’s Industrial sector is expected to continue

​SYDNEY, 7 March 2014 - During the final quarter of last year, Jones Lang LaSalle recorded Industrial asset transactions of AUD 771.7 million in NSW. This is the highest quarterly value total since Jones Lang LaSalle began recording data over a decade ago. 

Jones Lang LaSalle’s NSW Managing Director and National Head of Industrial, Michael Fenton, said the spike in sales is largely a result of a high level of investor activity, complemented by a lack of quality product available in the Australian Industrial market.

“Both domestic and offshore funds have looked to increase their industrial portfolio weightings in Sydney over the last 12 months, particularly within the 3PL and logistics sector. The limited number of available assets to market has elevated competition between bidders, resulting in significant price increases and yield compression.”

Mr Fenton said he anticipates yields will continue to tighten. “Increased demand from domestic funds, superannuation funds, offshore investors – primarily Asian investors – and a growing number of syndicates and private investors will likely see a further compression of both prime and secondary grade yields in the near term, as investors compete for a limited number of well-tenanted, well-located Industrial assets.

“Syndicators and private investors are expected to continue to avidly pursue Australia’s prime Industrial stock while interest rates remain low.”

Mr Fenton said nationally, there is limited stock available. “We anticipate some groups will start looking at offloading major prime stock this year in order to take advantage of current market conditions and the strength of the buyer market, which is expected to continue throughout 2014.

“Major Industrial developers are looking to replenish dwindling land holdings in the short term, while the continued low cash rate is likely to buoy business confidence and increase Industrial land enquiry levels from corporates and mid-tier developers.”

Mr Fenton said the east coast Industrial markets including Sydney, Melbourne and Brisbane are likely to see the most activity throughout 2014, although the Perth market is deepening for Industrial property.

According to Mr Fenton, in NSW the housing market is likely to be a key driver of economic growth. “A strong growth in house prices has given householders a little more confidence, which has benefited the retail and finance sectors. This may translate into stronger demand in the Industrial sector in the next 12 to 18 months.” 

In the outer western sub-precincts of Sydney, a weaker tenant demand environment and continued speculative activity is likely to contain Industrial rental growth for the short term. “The pre-lease market may improve over the next year as business confidence gradually recovers. Developers are likely to combat patchy demand by way of increased concessions in the form of elevated incentives.”

In South Sydney, rental growth is expected to be more positive. “We anticipate rental growth will increase further in supply constrained and strategically important markets, such as South Sydney. This area is expected to continue strong rental growth levels, as residential encroachment diminishes available leasing options.

“Across NSW, better quality secondary-grade asset pricing could be further supported as investors with mandates to increase their industrial portfolios find limited investment opportunities within the prime grade, and start to explore options within the secondary market,” concluded Mr Fenton.