Industrial facilities just getting bigger

Industrial facilities just getting biggerIncreasingly larger distribution and warehouse facilities are not only attracting tenants, but also investors with returns on industrial property hitting a high of 11.7 percent, according to new research from Colliers International. The report, Supersized stock: Industrial floor space reaches record highs, revealed the increasing scale of distribution centres and warehouse facilities is appealing to a strong investor appetite. Facilities across the eastern seaboard are 33 per cent larger than they were in 2010, with national average floor space increasing in scale due to occupiers competing for the most efficient model.”Growth in floor space is affected by the relentless drive for efficiencies, e-commerce and growing demand from population growth,” said Malcom Tyson, managing director of industrial at Colliers International. “Occupiers are consolidating their operations into larger facilities to reduce overheads, centralise stock and streamline transport flow.” According to Tyson, the average size, nationally, of a new facility is currently 13,972 sqm, with sizes forecast to continue to grow for all major cities except Perth. Melbourne leads the way, with the average size of a new facility at 19,555 sqm – the biggest in five years.Colliers cited IPD data that shows, from an investment perspective, the industrial market continues to be a market leader, with total returns reaching a peak of 11.7 per cent ahead of other commercial sectors such as retail (11 per cent) and office (9.6 per cent).”Investors are attracted to industrial property’s strengthening returns because of its structured income, strong covenant and low associated risk,” said Tyson. “Leading institutions including Goodman, Australand, DEXUS and Charter Hall are under commercial pressure to deliver strong returns as substantial inflows from offshore and local investors have boosted coffers.”In response, institutions have led the trend to develop purpose-built warehouses and distribution centres for pre-committed occupiers. A good measure of speculative stock has also been delivered this year throughout the transport and logistics nodes in Sydney and Melbourne and, to a lesser extent, in Brisbane.”Tyson said the activity is set to continue in Sydney with more than 110,000 sqm of large-format supply due to hit the market over the next 18 months.”In Melbourne’s west, industrial ‘super sheds’ over 20,000 sqm are being developed, with two new 24,000 sqm facilities to be completed in the second half of 2014,” he added.