Industrial property on a roll as big players get set

The industrial property market is locking in its status as one of the most active in Australia, with heavyweight Lendlease expanding its holdings.

The industrial property market is locking in its status as one of the most active in Australia, with heavyweight Lendlease expanding its holdings and a tie-up involving Canada’s Brookfield separately acquiring properties.

Industrial property has been the hottest area for large and small players in property even as traditional sectors have been under pressure.

Big industrial portfolios have been marketed and some are now being targeted as purchasers bet that dramatic rent rises for once-unloved sheds offset the impact of higher interest rates.

In one of the latest plays, Lendlease’s Australian Prime Property Fund Industrial has just expanded its empire with the purchase of a complex in Sydney’s industrial heartland, paying Arrow Capital about $47.05m for a Smithfield asset.

The building, 15 Britton St, is in a core logistics area in Sydney’s west, and is one of the many complexes now benefiting from the boom in last mile deliveries.

The 12,979sq m warehouse and office is on a short-term lease to a prominent snack food manufacturer and sits on a 3.2ha site.

Buying the asset is part of the fund’s strategy to provide warehousing and logistics solutions that meet the demand for more last mile distribution facilities.

Rivals HMC Capital and Hale Capital are also active in the area.

The fund plans to unlock more value from the site, which is adjacent to one of its existing holdings. It plans to redevelop both sites into a multi-level logistics facility using Lendlease’s development expertise.

Big companies including Stockland, Charter Hall and Goodman are also pursuing multi-level warehousing, which big customers are chasing.

Gavin Bishop and Sean Thomson from Colliers and Chris O’Brien and Jason Edge from CBRE handled the sale.

APPF Industrial fund manager Tim Simpson said that on a global scale, Australia was “under-catering for high quality and thoughtfully designed infill logistics properties to meet the accelerating shifts in consumer habits where tenants require fast and efficient supply chains”.

Others are also capitalising on the trend.

A new $700m last mile industrial and logistics venture launched by fund manager Centennial has closed oversubscribed after drawing wealthy and wholesale investors vying for equity in a $45m slice of the vehicle, alongside Brookfield Real Estate Secondaries and the local manager.

The Enhanced Value Partnership, which is Centennial’s first with Brookfield’s Real Estate Solutions business, will recapitalise existing assets owned by the local group and give it firepower to buy, reposition and develop niche, mid-space industrial and logistics assets in tightly held urban areas.

Centennial’s executive director of private wealth and COO, Lyle Hammerschlag, attributed the fast take-up to the firm’s strong track record in the mid-space industrial sector, where it plans to turn buildings into institutional-grade assets.

Targeting core-plus to value-add estates and buildings, Mr Hammerschlag said the fund’s primary focus would remain on assets offering 1000sq m to 10,000sq m tenancies or estates between $10m to $75m.

Four fully leased seed assets in some of Brisbane’s and Melbourne’s prime inner ring industrial areas, valued at $100m, were added to the fund, with a pipeline of another $90m of sites under review across the eastern seaboard.

Centennial CEO, I&L Paul Ford said the group saw opportunities in the mid-space, last mile and infill sectors. “This market is strongly supported by multiple demand and sector drivers but is often overlooked by institutional investors due to initial scale requirements and management intensity,” he said.

“While the industrial sector is still performing strongly, we do anticipate some further cap rate softening and believe we are very well placed to seize opportunities and act quickly.”