Sydney, 20 February 2014- The year has started with a real sense of urgency in the industrial investment market in Brisbane according to Edward Bull, Qld Director CBRE Industrial Investments.
Investment activity throughout 2013 was fairly limited but a build-up of momentum over the year is finally coming to fruition, with a large proportion of deals concluding in the December quarter and into the start of 2014. According to the recently released CBRE Industrial Marketview, $207 million worth of deals transacted in the fourth quarter of 2013 alone (compared with $545m for the entire year).
With the increasing mandates for industrial investments comes the inevitable yield compression for the quality A grade long term investments. Yields for these assets are sitting around 7.5% - 7.75% as evidenced by the recently reported off market saleof Dexus assets to Propertylink for $62.5M brokered by Edward Bull & Peter Turnbull of CBRE Investments.
The majority of the listed REIT’s have been underweight Brisbane industrial and with more product of significant scale being available in Melbourne and Sydney, this only compounds the situation.
Mr Bull commented; “We are experiencing a situation where there are enquiries on a regular basis from groups representing offshore sovereign wealth funds, pension funds and investment banks, as well as local super funds.”
“The ability to unearth stock for the market is the biggest issue at present because if it is genuinely for sale there is a market for it.”
“We are seeing some of the mid-tier funds or groups looking at assets considered B Grade or secondary. They are willing to take on value add or leasing risk for the yield spread, as long as it is relative to the risk.”
The start of 2014 has also seen the start of renewed confidence in the leasing market albeit the deals are still relatively soft due to the underlying vacancy levels.
CBRE’s Peter Turnbull can see the leasing market improving in the short to medium term, with more transactions being reported.
“This will only help the investment market for those buyers looking to take on leasing risk,” said Mr Turnbull.
“The current industrial supply forecast for Brisbane is around 500,000sqm for 2014, up from 380,000sqm the previous year. CBRE is currently controlling in excess of 50,000sqm of design and construct appointments for Brisbane which is helping underpin the construction activity.”
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2013 revenue). The Company has approximately 44,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 350 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website atwww.cbre.com.au.