Investment liquidity in Australia’s industrial market is lifting

• The research found investment volumes in Australia’s industrial market were $3.11b in Q2, up from $1b in Q1
• It also found prime yields across most of Australia’s industrial market were stable to firming
• The higher level of investment activity is expected to continue for the rest of 2024, with buyer appetite for industrial property remaining strong, with institutional and offshore buyers particularly active

Investment liquidity is returning to Australia’s industrial market with volumes recovering and yields stable as logistics assets remain highly sought after, according to the latest research from Knight Frank.

The firm’s Australian Industrial Review Q2 2024 found investment volumes in Australia’s industrial market were $3.11 billion in Q2, up from just over $1 billion in Q1, putting it back on par with 2022 turnover levels.

The notable transaction was the $780 million portfolio purchased by the Rest Super/Barings JV from Goodman Group. However, this was supported by big ticket transactions which included the fund through purchase of cold storage in Lytton Brisbane by Hale Capital for $110 million, Gateway Estate,
Sydney for $102 million and the Marsden Park turnkey purchase by EQT Exeter for $100 million.

There were also 10 sales in the $50 to 100 million price bracket as a broader range of super funds, offshore entities and local institutional investors were active.

Knight Frank National Head of Industrial Logistics James Templeton said investment in Australia’s industrial market increased strongly over the second quarter of the year.

“This was reflective of the greater liquidity observed from the start of the year,” he said,

“As we foreshadowed in Q1, the limited completed sales in that quarter did not reflect the underlying market activity, and we have now seen that market activity translate into finalised transactions.

“We expect this higher level of investment activity to continue for the rest of 2024, with buyer appetite for industrial property remaining strong, with institutional and offshore buyers particularly active.

“Overall vacancy has risen in the industrial market, with the East Coast cities of Sydney, Melbourne and Brisbane seeing a further rise of 17% over Q2, however investors continue to be confident in the fundamentals of the market.

“Whilst tenant take-up was strong in Q2, it has since slowed, and remains skewed towards new and more efficient buildings.”

Knight Frank’s recently released APAC Horizon report found the industrial sector was the most favoured for cross-border capital in Australia, along with the office market. It is expected these sectors will each have 27% of cross-border capital allocated to them this year.

Knight Frank Partner, Research and Consulting Jennelle Wilson said prime yields across most of Australia’s industrial market were stable to firming.

Prime yields held firm in Q2 across the Sydney (5.46%), Adelaide (6.38%) and Perth (6.38%) markets, while Brisbane firmed by 5 basis points to (6.20%).

The Melbourne average softened by 5 basis points to 5.55% due to softening in the North and West markets, with all other precincts firm.

“Increased transaction volumes have brought greater certainty to yields with the overall trend stable,” said Ms Wilson.

“Secondary yields show minor variability across the markets, but overall have also stabilised.”

For more details, read the full report here