Private investors' share of Victorian industrial market triples in eight years: Savills

Private investors are making themselves heard in Victoria’s industrial market with their market share of purchases jumping from 8% to 26% in just eight years, according to Savills Australia.

In the 12 months to June 2006, private investors’ purchases totaled $78 million, or 8%, while in the 12 months to June 2014 purchases totaled $278 million (of sales over $2 million) to 26%.

A compression in primary and secondary yields, now sitting at 7.25% to 8% and 8.75% to 10% respectively, was also noted.

Behind the surge is strong yields, low interest rates, and growing market confidence, which are driving a rise in private investment in Victorian industrial property.

Savills directors Ben Hegert and Chris Jones pointed to their latest deal where a New South Wales investor paid $5.7 million for a 20,661 square metre office and warehouse complex in Melbourne’s Tottenham as an example.

“From ten years ago when they accounted for less than 10% of the market private investors have matured as an investor class in both their approach to and involvement in a market which had been perhaps wrongly perceived as too complex,” said Jones.

“But that has all changed with the realisation that industrial property possesses some of the strongest property fundamentals, and when compared to residential, can offer better yields and more secure lease profiles, among other things,’’ he said.

The growth in industrial interest has also been due to the shift in e-tailing and subsequent growth of warehousing requirements, as well as SMSF allowances.

Meanwhile, Hegerty said that the industrial market has been tightly held in recent years due to a belief that there are few other assets in which to park cash safely.

“What we are seeing now is the market reaching a point where vendors are happier with economic conditions and what that means for investment generally,’’ Hegerty said.