Industrial investment is set to remain on par with 2011 levels, according to research from Jones Lang LaSalle.
Jones Lang LaSalle’s Industrial Investment Review report examines the key themes for 2011 that are being played out in 2012.
The report says the outlook for the Australian industrial market mid-2012 remains for a gradual upswing in indicators including rents and values, with modest improvement in activity such as construction, occupier take-up and investment volumes.
It also forecasts:
Steady investment volumes driven by fund-consolidation, domestic and offshore group competition;
Further portfolios offered to the market;
Large sales to hold up, but not increase by much;
Supply and demand to remain balanced, with constrained new supply continuing to support growth in existing market rents.
The report says RREEF, CIMB Group, Pramerica, Telopea, Mapletree and Blackstone are looking to direct funds toward Australian industrial assets.
Michael Fenton, JLL Australia head of industrial, says the industrial sector is being re-rated by offshore funds due to its attractive returns.
“Between 1994 and 2011, the industrial sector delivered higher returns with lower volatility than office markets. In fact, over this 18- year period Australian industrial property has offered risk adjusted returns only just surpassed by major retail property categories,” Fenton says.
“While good quality major retail assets now typically offer yields between 5.25 percent and 8.50 percent, prime grade industrial assets in the major east coast cities currently range from 7.50 to 9.50 percent. This offers investors a higher upfront income return, boosting their total return, before rental growth or capital growth potential is considered,” he says.