Some of the country’s biggest industrial landlords including Frasers, Centuria, GPT, Salta and Mapletree have cashed in on surging rents and record low vacancy rates to lease up over $500 million of brand-new warehouses and lock in tens of millions of dollars of long-term annual income streams.
These deals include over 100,00 square metres of speculatively built warehousing in Melbourne’s south-east, which developer Cadence Property Group leased before completion in partnership with ASX-listed heavyweights GPT and Centuria.
“It was a pretty big rollout – don’t think anything this size has been done before in the south-east – but we took the position that with vacancy already under 1 per cent, the market would absorb it,” Cadence managing director Charlie Buxton told The Australian Financial Review.
Still, Mr Buxton said he did not expect to lease all the available space across the two estates – Keylink in Keysborough and Southside Industrial Estate in Dandenong South – before practical completion.
“We were surprised by the strength of the market. There is a huge amount of demand for high-quality space,” he said.
“We’re super happy and so are our partners. There’s still next to no vacancy. That’s just not just specific to the south-east, but most markets in NSW and Victoria. It’s sub 1 per cent everywhere.”
Not only has it all been leased up in 18 months– tenants include furniture and homewares retailer Early Settler, ASX-listed packaging maker Orora, outdoor furniture retailer Harman and another packaging company San Miguel Yamamura – but the more recent deals have been struck at close to new market rates of around $115 per sq m.
“There’s positive pressure on rents,” Mr. Buxton said.
“Rents have had to rise 40 per cent to make projects stack up and in most markets that has occurred.”
A new report by CBRE found super prime industrial rents in Sydney have surged 38 per cent over the past 12 months to March to average $215 per sq m. They are up 23 per cent in Melbourne and 30 per cent in Perth over the same time period.
Nationally, prime industrial rents rose 25 per cent over the 12 months to March, the strongest annual rental growth in over 30 years, JLL found.
With vacancy at 0.5 per cent in Sydney, 1 per cent in Melbourne and less than 1 per cent in Brisbane, major industrial players have swiftly leased up new warehousing projects to major retailers, manufacturers and logistics companies seeking to streamline their supply chains and get goods quicker to end customers.
At the Yards Estate at Kemps Creek in Western Sydney, joint venture developers Frasers Property Industrial and Aware Real Estate – the property investment arm of Aware Super – have leased a 29,808 sq m temperature-controlled automated warehouse to ASX-listed pharmaceutical packaging company Probiotec for 15 years.
Probiotec will consolidate its packaging operations into the new $120 million warehouse, which will include 1,118 sq m of mezzanine office space and house 200 employees.
This latest deal continues the trend of large manufacturing businesses exiting older style facilities and seeking modern, bespoke and operationally efficient buildings.
Supply chain and industrial property specialist TMX which designed the new facility, due for completion next year.
Frasers Property Industrial has also leased over 38,000 sq m of under-construction warehouse space in south-east Queensland and Melbourne to Frank Walker’s National Tiles retail empire on 10-year leases.
In Yatala, on the Gold Coast National Tiles will lease a new 17,500 sq facility within FPI’s Vantage estate that will serve as its local distribution centre, customer trade centre, design centre and Queensland support office.
The Yatala warehouse is due for completion in the second quarter of the year, while a new 20,710 sq m facility at FPI’s Canvas West estate in Tarneit in Melbourne’s west that National Tiles will also lease is due for completion in late 2023.
Both National Tiles will feature rooftop solar arrays and rainwater harvesting and reuse systems as part of sustainability features that FPI hopes will achieve five-star ratings from the Green Building Council of Australia. Hindmarsh is building the Gold Coast warehouse while Texco Construction is the Melbourne builder. Todd Grima from CBRE brokered the Tarneit lease.
Also getting in on the industrial leasing action are Rich Listers the Tarascio family, after leasing a new $55 million facility at their Salta Nexus Altona Industrial Estate to transport and logistics business, Austrans for 15 years.
Colliers’ agents, Nick Saunders and Hugh Gilbert, secured the lease of the 20,692 sq m facility, which will be situated adjacent to the proposed Altona Inland Port and is due for completion in May.
Lastly, Singaporean real estate giant Mapletree Investments will add another 37,751 sq m of logistics space to its Crestmead logistics estate in Crestmead in Brisbane’s outer south.
This commitment follows the completion of the 63,000 sq m first stage which was fully leased to five national tenants within two months of completion including Bunnings, Bevchain and Visy.
“We will continue to construct modern logistics parks as a core part of our Australia strategy,” said Mapletree’s head of logistics for Australia, Matthew Meredith.
This article was originally written by Larry Schlesinger and published by the Australian Financial Review on April 13, 2023.