Industrial property yields tighten as demand grows
Industrial property asset owners can expect yields to compress over the course of 2015, as demand for "super prime" properties rises, according to CBRE Research.
The property service provider reported that offshore investors had outbid domestic buyers for a number of assets in the second half of last year, pushing yields below seven per cent, with 225 properties changing hands for a post-global financial crisis dollar value high of $5 billion.
Of the $5 billion of sales, more than 20 per cent came through the sale of eight portfolios, which "allowed investors, particularly offshore groups making their initial entry to the Australian property market, to mark large scale purchases".
While CBRE identified the emergence of demand for industrial assets from offshore investors, the report said that "these groups, in the first half of 2014 were being outbid by domestic investors".
"This was not the case in Q4, with four sub-seven per cent yield purchases being made by offshore groups," CBRE said.
"The sharp yields in the super prime space being driven by offshore groups has the potential in 2015 to see domestic groups focus on prime and secondary assets, especially those with either re-zoning or re-development potential."
While the report said yields would tighten as the result of increased demand for industrial properties, it forecast that rents would rise by 1.5 per cent this year, with stronger growth expected in 2016 (2.1 per cent) and 2017 (2.4 per cent).
AUTHOR
Nicholas O'Donoghue
Recommended for you
Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
