Institutional investment in industrial skyrockets

Institutional investment in industrial skyrocketsIndustrial transactions in the year to June 2014 are up dramatically compared with the previous year, with funds and trusts doubling their spend in industrial property from $930 million to more than $2 billion.The latest research into industrial investment, conducted by Savills, shows that approximately $3.7 billion worth of industrial transactions was recorded nationally in the year to June 2014, up from $2.59 billion in the previous year, and up on the five-year average of $2.9 billion.Savills says several factors have contributed to the 43 per cent increase in transaction values witnessed between June 2013 and June 2014. Vendors, particularly trusts, were reluctant to trade in the year to June 2013. Since then, however, owners have been willing to offer non-core stock to the market. They have also been competing to buy at the same time, which has helped fuel activity in the sector.AREITs have also been active in acquiring prime industrial assets in the past 12 months, including the purchase of land banks for future development. Savills says examples include Stockland’s purchase of an industrial site at St Marys from Goodman for $72.85 million and Mirvac’s acquisition of a 21.9 ha plot at Eastern Creek Quarantine Station for $55.05 million.Funds have also been active in the industrial market, picking up several properties in one transaction. Private investors were the third most active purchaser type in the same period, having occupied top position in the 12 months to June 2013. Savills says the fall of the private investor category from first place to third can be attributed to its failure to compete with the aggression shown by AREITs.Savills forecasts the industrial investment market will remain strong over the next 12 months. It says the current lack of investment-grade stock has created a sellers’ market, thus helping to tighten yields in 2014, with further tightening expected in 2015.