Why this giant property fund is betting big on sheds

A super fund giant, which has launched headlong into the premium warehouse end of Australia’s industrial property boom, believes there is still plenty of money to be made from owning sheds.

ISPT, a giant property development and investment entity owned by some of the country’s largest industry super funds, controls a $17 billion Core Fund. And it is allocating a bigger portion of that cash to invest in big sheds on the eastern seaboard.

Demand from large companies for high-quality industrial sheds is being driven by population growth, e-commerce, non-discretional spending and a growing circular economy, all of which are “showing good signs for us that we’ve still got a really healthy market,” said ISPT head of industrial property Tim Jackson.

Coles signed a five-year lease with ISPT over an 18,975 square metre building at 61 Eastern Creek Drive.Credit:

Coles, Australia Post, Couriers Please, Harris Farm Markets and Karras Cold Logistics are recent tenants in ISPT’s super prime facilities.

Coles has signed a five-year lease over an 18,975 square metre warehouse in its speculatively built facility at Eastern Creek, in Sydney’s west. Australia Post inked a 10-year lease on an 18,460 square metre shed in the Bessemer Business Park in nearby Blacktown.

Couriers Please, Harris Farm and Karras Cold Logistics have pre-committed to 57,000 square metres in the nearly finished $420 million Elevation park in the Greystanes industrial precinct, about 27 kilometres west of Sydney’s centre.

Jackson said ISPT’s current industrial portfolio was worth around $3.7 billion. ISPT wants to lift the Core Fund’s industrial portfolio from it current level of about 12 per cent, up to 35 per cent.

“We have a development pipeline of roughly 492 hectares that will give us an additional $7.7 billion by about 2032,” he said. “It’s a really long development program for ISPT, but that’s how we’re reweighting the Core Fund’s allocation to the sector.”

The strategy was to build super prime states with really high-quality sustainability credentials, Jackson said. That includes solar arrays, rainwater harvesting, and EV charging.

Australia Post will move into ISPT’s Bessemer Business Park in Blacktown.Credit:

In doing so, it is taking on heavyweights such as Goodman Group, whose expertise in building and leasing warehouses has put a rocket under its shares. Its market value has gone from $4.70 a decade ago to $37.42 a share now.

“For a long time, the Core Fund was predominantly retail and office. They saw the opportunity to reweight into industrial to take advantage of the population growth,” Jackson said.

“Our main competitors would be Goodman, ESR, Charter Hall and Dexus.”

Commercial agency JLL recorded 71 occupier moves over the most recent quarter, the highest reading for this year. Prime rents grew in 15 and secondary face rents grew in 13, of the 22 tracked precincts, JLL said.

Sydney’s inner west and outer south-west had solid gains in mixed net face rents (1.1 per cent and 1.7 per cent, quarter on quarter, respectively) and Brisbane southern sector rose 1.6 per cent, but there was minimal growth in other east coast markets, JLL said.

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