Home Property Australia Last-mile sheds still in vouge

Last-mile sheds still in vouge

  • May 24, 2023
  • by Property Australia
Growth in online shopping has made last-mile delivery crucial.

Inner-city sites are in high demand due to the increasing population and the booming e-commerce industry.

Last-mile, inner ring warehouses are particularly sought after, and a flurry of deals is refocusing attention on the sector.

Prominent investment powerhouses such as Brookfield Asset Management, the Canadian behemoth, and Cadillac Fairview, the real estate division of Ontario Teachers’ Pension Plan, are swiftly acquiring properties dotting the eastern coast.

They are providing support to operators like Centennial and Gateway Capital who are capitalising on strategically located sites that hold potential to evolve into the future’s coveted industrial assets.

Centennial recently partnered with Brookfield with its new $700 million ‘Enhanced Value Partnership’ (EVP). Centennial contributed to the new fund by providing four foundational assets.

These assets involve the recapitalisation of three distribution centers located in Brisbane and Melbourne, as well as an industrial park situated in the highly sought-after Australia TradeCoast precinct in Brisbane.

Centennial’s Executive Director and CEO, Industrial & Logistics Paul Ford, said the partnership’s strategy is based on selecting niche, mid-sized or underperforming assets within urban, supply constrained markets that are generally overlooked by institutional investors due to scale requirements and management intensity.

“The partnership has been created to capitalise on continued tailwinds for the sector such as the continued growth in e-commerce, improvement in customer service models and material levels of existing building obsolesce,” he said.  

“Underscoring the strong fundamentals for the logistics sector is that Australia has the lowest vacancy rate in the world at just 0.6 per cent.

“When you add factors such as Australia’s population being expected to grow by 4.2 million by 2032, e-commerce penetration levels and delivery models well below global peers and severe supply constraints, we only see continued outperformance for true last-mile, inner ring warehousing and logistics markets.”

The recently launched EVP fundraising initiative will primarily focus on acquiring properties and structures that encompass leasehold spaces ranging from 1,000 square meters to 10,000 square meters.

These properties will be located in well-established inner ring areas and markets with limited available land. The target properties typically hold a valuation between $10 million and $75 million once they reach a stable state or undergo redevelopment.

Gateway Capital is also focussing on “urban core plus” assets in its new investment vehicle backed by Cadillac Fairview, targeting a $1 billion portfolio.

The partnership will seek opportunities in areas that are forecast to benefit from strong tenant demand linked with the growth of e-commerce, together with other structural tailwinds supporting the industrial and logistics sector.

Karl Kreppner, Regional Head of APAC at Cadillac Fairview, said the industrial sector still has attractive fundamentals and that “the changing macro-environment positions us well to take advantage of opportunities as they arise”.

It comes at a time of supply decreases and rent increases. 

According to JLL, quarterly supply decreased for a third consecutive quarter as developers work through COVID-19 pipelines.

Supply in Q1 2023 reached 303,100 sqm, down 47 per cent from the 573,800 sqm of completions recorded in Q4 2022.

According to JLL, national prime average weighted net face rents increased by 4.5 per cent to AUD 165 per sqm p.a. This increased annual growth to 24.9 per cent. This annual growth was again a record high.