Industrial sector outperforms all real estate classes
While most real estate asset classes struggled amid COVID-19, the industrial sector thrived, accounting for nearly 30 per cent of total investment volumes in 2020.
Colliers International’s latest Capital Markets Investment Review found that the industrial sector outperformed all mainstream real estate classes in 2020, including office, retail and hotels.
The sector accounted for 28.5 per cent of all investment volumes in 2020, or $5.49 billion, well above the 15.4 per cent recorded in 2019.
The strong level of investment recorded for the year, which surpassed 2019’s figure by 11.5 per cent, followed robust fundamentals within the sector including e-commerce growth, food logistics and infrastructure investment.
Ultimately, the new entrants to the market created a deeper pool of capital across the industrial sector, allowing it to thrive amid the impacts of the pandemic, Colliers International’s head of industrial capital markets Gavin Bishop explained.
“Changing consumer preferences towards online grocery and food platforms in 2020 has resulted in strong occupancy demand from occupiers in the food subsector,” he noted.
“These businesses have continued to perform well, with expenditure on food items rising by 11 per cent since panic induced buying in March 2020, well above the 2.8 per cent recorded for the corresponding period in 2019.”
This trend saw corporate groups underpin the vendor profile, accounting for nearly 60 per cent of assets traded, with most sold via a sale and leaseback arrangement, Mr Bishop pointed out.
Geographically, the east coast states accounted for 91.6 per cent of investment volumes in 2020 as “institutional groups look to capitalise on strong leasing fundamentals and favourable outlook for further yield compression in these states.”
Looking ahead
Experts believe that the industrial and logistics sector could be in for another year of growth in 2021, supported largely by positive investor sentiment that is expected to jump-start a broad-based renewal of activity in the market.
In fact, Colliers predicted that around $26 billion in capital will be placed in the market and broadly spread between offshore and domestic institutions, along with private investors.
According to Mr Bishop: “Given that just $5.49 billion transacted in 2020, it highlights the significant mismatch between supply and demand.
“This depth of capital will continue to drive further yield compression in the sector in 2021, albeit concentrated in prime assets as investors chase security.”
More from this writer:
-
Why it’s still worth selling – even in lockdown
-
Over 200 Perth suburbs see winter price growth
-
Auction volumes on their way back up
-
Low interest rates drive record refinancing
-
Tassie’s own $20k HomeBuilder grant finds early success
-
Capital cities see stronger auction success
-
2020 vs 2021: How lockdowns have impacted the market