Property & Market Update Videos Library

Q3, 2024

Overview

In this video, Stef Frawley, Director of Portfolio Management at TMX Transform, examines the shifting trends within the industrial real estate market amidst a softening economic climate. This market shift has paved the way for transformation projects and a “flight to quality,” as occupiers seize opportunities to secure high-quality spaces and landlords actively pursue blue-chip tenants.

With speculative builds becoming a preferred alternative to Brownfield sites and rising operational costs like land tax, occupiers are focusing on cost efficiency and portfolio optimization. Stef highlights TMX’s ability to deliver impactful industrial projects, referencing recent completions and new developments across Australia.

Market Overview

1. Market Transition & "Flight to Quality":
   • Occupiers are strategically opting for quality over quantity, taking advantage of the current softening market to secure premium spaces. Speculative developments offer an attractive option, providing businesses with more flexibility in securing modern, high-quality facilities.
2. Increased Landlord Motivation:
   • Landlords are actively seeking blue-chip tenants, making the market favorable for occupiers looking to secure beneficial lease terms and quality spaces.
3. Cost-Control Focus Due to Rising Land Tax:
   • A significant rise in land tax has heightened occupiers' focus on controlling expenses. Tenants are seeking to optimize their use of warehouse space, balancing cost-efficiency with operational needs.
4. Preference for Lease Renewals Amid Uncertainty:
   • Many tenants are opting to renew leases rather than commit to new ones, given current market uncertainties. However, favorable commercial terms remain available, making this an advantageous time to negotiate.
5. Recent TMX Project Highlights:
   • TMX has successfully delivered large-scale projects, including a 9,000 square meter site in Queensland for Martin Brower, demonstrating expertise in managing complex industrial developments.
   • Construction has commenced on a 16,400 square meter container storage facility for Mondi LVGL at Jandakot Airport, further reinforcing TMX’s commitment to delivering innovative industrial solutions.

Future Trends

1. Growth in Speculative Builds:
   • Speculative developments will likely continue gaining traction as occupiers prioritize flexibility and accessibility over traditional Brownfield sites. This trend reflects an industry-wide shift toward readily available, high-quality real estate options.
2. Rising Demand for Blue-Chip Tenant Spaces:
   • As landlord motivation remains high to attract stable, high-profile tenants, occupiers could continue benefiting from competitive lease terms and added flexibility, further enhancing their portfolio strategies.
3. Increased Efficiency-Driven Projects:
   • Rising land tax and operational costs are set to intensify the focus on portfolio optimization, pushing businesses to explore transformation projects that enhance cost efficiency without compromising operational capacity.
4. Shift Towards Lease Renewals:
   • Given market uncertainties, lease renewals may remain the preferred option for occupiers, though strategic lease negotiations could yield more favorable long-term terms.
5. Sustainable Industrial Development Demand:
   • As companies increasingly prioritize eco-conscious operations, TMX’s experience in delivering efficient, sustainable industrial solutions will position it as a leader in this evolving market, with more occupiers likely to seek environmentally aligned, high-quality facilities.

Q1, 2024

Market Overview:

The industrial real estate market is experiencing a steady shift toward larger, specialized facilities, driven by advancements in automation and growing demand from sectors like FMCG, pharmaceuticals, and non-discretionary retail. As market stabilization occurs, opportunities for strategic savings and infrastructure investments between landlords and tenants are emerging. TMX’s recent projects across Australia and New Zealand illustrate this trend, positioning TMX as a key player in facilitating this market evolution.

Key Points

1. Larger Requirements & Specialization:
   • There’s an increasing demand for facilities of 20,000 to 30,000+ sqm that are precisely tailored to meet the specific needs of occupier operations and network requirements.
   • The need for these specialized spaces is being driven by technological advancements, particularly in automation, and the evolving needs of third-party logistics (3PL) providers.
2. Market Stabilization:
   • After recent market fluctuations, stability is beginning to emerge, particularly in larger-scale projects. This stability is fostering opportunities for mutually beneficial savings and critical infrastructure investments between landlords and customers.
3. Sector-Specific Growth:
   • Key growth sectors like FMCG, pharmaceuticals, and non-discretionary retail continue to drive demand for transformative, specialized facilities, leading to a robust pipeline of projects in these sectors.
4. Notable Project Highlights:
   • Victoria: A multi-channel fulfillment business has recently committed to two facilities, totaling 15,800 sqm, reflecting the demand for tailored, sizable spaces.
   • New South Wales: Car Cold Storage has invested in a speculative temperature-controlled facility, highlighting growth in cold-chain logistics.
   • New Zealand: New Zealand Post has launched a state-of-the-art automated facility capable of processing 30,000 parcels per hour, showcasing the region’s move towards high-efficiency logistics.
   • Western Australia: Couriers Please has completed a new facility, further illustrating TMX’s role in advancing logistics infrastructure across Australasia.

Future Trends

1. Increased Demand for Automation and Specialized Logistics Solutions:
   • As automation becomes integral to logistics, the need for technologically advanced and purpose-built facilities will continue to grow, allowing businesses to operate more efficiently and scale effectively.
2. Focus on Portfolio Optimization:
   • TMX is seeing a strong demand for portfolio optimization services. This trend enables businesses to leverage the stabilized market to seek further efficiencies and cost savings across their operations, ensuring they remain competitive.
3. Opportunities for Enhanced Efficiency through Strategic Real Estate Decisions:
   • With the current market conditions, occupiers and landlords have the chance to make strategic real estate decisions that enhance operational efficiency, accommodate sector-specific needs, and support sustainable growth in the long term.

Q4 2023

Market Overview:

1. 3PL (Third-Party Logistics):
   • This sector has seen significant growth, especially due to the fluctuating demands in healthcare and pharmaceutical industries. 3PL providers are benefiting from increased investment and consumption.
2. Retail Sector:
   • While overall volumes are down, especially in online retail, there are anomalies—some value segments in the market continue to show growth.

Recent TMX Projects:

TMX has been involved in several key projects across Australia and New Zealand:

1. Catch (Victoria):
   • Completed a 28,000 sqm sublease for Catch.
2. Device Technologies (Sydney):
   • Developed a network and operational strategy, resulting in a 17,000 sqm pre-lease for Device Technologies at Marsden Park.
3. L'Oreal (Queensland):
   • Pre-committed to a 15,000 sqm facility at Redbank.
4. Kmart (New Zealand):
   • Recently completed a 40,000 sqm facility in North Island, part of Kmart's ongoing expansion.

Takeaway:

The video highlights TMX’s continued involvement in high-profile property projects across key industries, with a focus on sectors benefiting from government and consumer spending, such as pharmaceuticals, 3PL, and value-based retail.

Q3, 2023

Market Overview:

Dominic Sorbara, Executive Director of Property at TMX Transform, highlights that customers are increasingly taking a longer-term perspective in their approach to supply chain transformation. This shift includes a greater focus on automation and network strategy, with businesses beginning to look beyond short-term gains and prioritizing larger, transformational projects across their operations.

Key Trends:

1. 3PL Sector Performance:
   • While third-party logistics (3PL) providers did well during the post-Covid catch-up and holiday season, businesses are now adopting a longer-term view on how to streamline and automate their networks.
2. Long-Term Supply Chain Transformation:
   • Businesses are starting to invest in larger facilities and more specialized spaces that incorporate automation and network efficiencies, looking ahead to future growth and operational optimization.

Recent TMX Projects:

1. IG Design (Victoria):
   • Committed to a 28,000 sqm Brownfield site in Dandenong South.
2. Couriers Please (New South Wales):
   • Achieved practical completion on a 28,000 sqm facility in Greystanes.
3. Harris Farm (New South Wales):
   • Nearing practical completion on an 18,000 sqm facility in Greystanes.
4. Maersk (New Zealand):
   • Completed an 18,000 sqm cold storage facility in Hamilton, benefiting from intermodal connectivity that will enhance their business operations in New Zealand.

Key Takeaways:

• The flight to quality continues, with businesses prioritizing prime locations in infill markets for their new developments.
• TMX is seeing more customers invest in strategic facilities that incorporate automation and network optimization to stay ahead in the evolving supply chain landscape.