Melbourne's industrial market to remain in investor spotlight after strong 2015: CBRE

Melbourne's industrial market to remain in investor spotlight after strong 2015: CBRE
Melbourne's industrial market to remain in investor spotlight after strong 2015: CBRE

Melbourne’s industrial and logistics market emerged as one of Australia’s most attractive asset classes, as reflected from the 50 basis point tightening in industrial yields in the last 12 months, says new research. 

Commercial real estate firm CBRE’s 2016 Q1 Industrial MarketView revealed a steady flow of offshore interest in the Victorian capital in 2015, with expectations for the momentum to continue in the year ahead.

After a strong last quarter, which saw $765.7 million in industrial property change hands, sales in the first three months of 2016 fell significantly, with only $87.2 million transacting over the period, albeit considerably more currently in due diligence. 

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Melbourne's industrial market to remain in investor spotlight after strong 2015: CBRE  

CBRE regional director, Industrial & Logistics, Chris O’Brien said this was due to a shift in investment sentiment in 2016, with buyers moving up the risk curve to seek more attractive returns. 

“2015 saw a significant flow of new offshore entrants to the market, looking to inject capital into low risk assets, such as real estate,” O’Brien said.  

“However, the first quarter of 2016 has seen a change in sentiment, whereby investors are seeking opportunities higher up the risk curve - reflecting higher yields through property fundamentals, leasing risk and value add opportunities, which bodes well for domestic players”.

Notwithstanding banks’ tightening lending criteria, a low Australian dollar and favourable cash rate, Melbourne’s industrial & logistics sector will remain a sought after market on a global scale, with the higher comparative yields on offer strengthening its appeal, according to the report. 

Following a six-year high for industrial supply in Melbourne during Q4, a smaller pipeline is expected in 2016 to reduce the risk of oversupply. 

Across Victoria, nearly 125,000 sqm was forecast for completion during the first quarter of 2016, with the western and south eastern precincts seeing the largest volumes of supply. 

The lower supply pipeline (55 percent lower than 2015) is also expected to encourage rent growth in the medium to long term. 

Major developments completed in Q1 include a 25,650sqm warehouse facility for Kathmandu in Truganina and a 25,000sqm warehouse in Merrifield.

Tags: 
Melbourne Commercial Investment

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