Stiff competition for logistics & industrial assets places Australia on the world stage
Recent and forecast competition for industrial investments are seeing yields in some Australian markets become comparable to major global cities
AUSTRALIA, 31 August 2021 – Having already broken investment records nationally over the last 12 months, Australia’s logistics and industrial market is expected to see a further acceleration in transaction activity over the next five years.
A report by JLL - A New Trajectory for Logistics Real Estate in Asia Pacific. - forecasts that logistics & industrial transaction volumes in the Asia Pacific region will rise to $50-60 billion between 2023-2025 from US$25-30 billion in 2019-2020, with Australia likely a major beneficiary.
The significant rise in capital allocations towards the logistics and industrial sector in Australia has been driven by the robust growth in ‘New Economy’ occupiers, including pure-play eCommerce and third-party logistics providers.
“Across the Asia Pacific region, and globally, we are seeing major institutional investors looking to increase their capital allocation to the logistics and industrial sector. Australia’s robust investment fundamentals, including a highly transparent market, stable income collection and a strong short-term rental growth outlook, are encouraging more and more groups to look at deploying across our key markets nationally,” said JLL’s Head of Capital Markets, Industrial & Logistics - Australia, Tony Iuliano.
“The challenges that most of these investors are facing at the moment is getting access to product that is of sufficient scale to meet their requirements. Major portfolios like Milestone take time and expertise to compile, and when significant opportunities are presented to the market they are always hotly contested,” said Mr Iuliano.
The competition for large, prime assets in Australia has seen yields across most core markets compress significantly over the last 12 months. According to JLL Research, prime market yields have compressed by up to 100 bps in parts of both Melbourne and Sydney over the year to Q2 2021.
JLL’s Senior Director, Industrial Research, Annabel McFarlane said, “The level of yield compression that has been recorded in Sydney and Melbourne over the last 12 months has been unprecedented. While both markets have been coming off a higher base than most established global cities, we are now seeing some market equivalent yields moving into the 3’s.”
“This has exclusively been the territory of major population centres like New York (3.77%), Paris (3.60%) and London (3.25%). However, with expectations of further compression over the balance of 2021, it demonstrates that Australia’s logistics and industrial investment market has rapidly increased in relevance on the global stage,” said Ms McFarlane.
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion in 2020, operations in over 80 countries and a global workforce of more than 92,000 as of June 30, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.