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Listings drop while interest grows

By Mathew Tiller on Sep 06 2017


Industrial property sales plunged 19% last financial year as the sector’s listings shrunk. In response, LJ Hooker Commercial’s agents heightened their off-market tactics to secure deals on behalf of domestic and offshore institutional buyers, private investors and developers, whose appetite for industrial assets has risen.

LJ Hooker’s Head of Commercial, Mathew Tiller, said sector sales declined from $5.8 billion in 2015-16 to around $4.7bn in 2016-17. 

“That’s not a sign that industrial is out of favour – quite the opposite,” he said.

“Listings in the industrial sector have simply shrunk. But landlords and owneroccupiers, who have tested the market with our network, have benefited from a swelling database of buyers  wanting to expand their interests in the sector. Industrial is undergoing a resurgence, especially in warehousing, with the likes of global giants Amazon capitalising on Australia’s love-affair with online retail.

“Industrial stock levels are currently at historical lows. We have no doubt that there is the readiness in the marketplace to absorb more listings and drive values higher.” 

Across Australia, industrial landlords and owner-occupiers can capitalise on the market’s under-supply. 

LJ Hooker Commercial Penrith’s Dave Reardon echoed Mr Tiller’s assessment on the shortage of listings.

“If we go back five years, we had plenty of stock and it was much easier,” Mr Reardon said.

“Now we have too many buyers and not enough stock. We’re going to owners of existing properties and tenants of expired leases and saying, ‘extend your lease or vacate because people want to buy the property’.”

Mr Reardon said a lot of people were unaware of the asset’s value as the shortage of transactions limited the opportunities to compare like-for like properties.

Additionally, he said owners were seeing their properties sell for at least 40 per cent above expectations because of the high demand.

“We are seeing the knock down of older properties in areas like St Marys and Kingswood where land values are surpassing what the improvements are worth. Their buildings have had their life and it’s time to move on.”

Mr Reardon said. Colm McHugh, Director of Industrial, LJ Hooker Commercial Perth, said that like Sydney, Perth too is exploring alternate opportunities for their clients. 

“In Perth, traditional industrial areas are still suffering a lack of larger stock in the market that bigger owners are seeking. Investment wise, large industrial properties are still very tightly held and long leased industrial investments are contested quite well, it’s a strong market.”

Mr McHugh said there were still several developers searching for multi-hectare land in prime industrial areas. 

“There’s not a lot of land and it’s tightly held, so to progress further you have to think outside the box when approaching owners who occupy a site,” he said.

“We’re approaching owners and tenants and asking ‘would you consider a sale and lease back?’’ Or ‘would you move to a different site as your business doesn’t need to be in this location anymore?’”

Mr McHugh said some owners who bought industrial property decades ago no longer need the size or location of their site and would do better to sell and buy cheaper properties in areas that are further out.

Fellow LJ Hooker Commercial Perth industrial specialist Richard Parry said: “Investor demand is strong with few vendors prepared to sell their securely leased assets.

“We are seeing more off market transactions- good agents are sourcing assets for institutional clients who are happy to retain the agent.”

Mr Tiller said that owners needed to keep up-to-date with the latest trends and what is happening in and around the areas where their assets are located. 

“From tenants and buyers to rezoning, new legislation and regulations - there is a lot that can change year-on-year, so on-the ground advice from an experienced, local commercial real  state specialist is invaluable.”

If you want your asset exposed to a nation-wide network of buyers and investors, talk to LJ Hooker Commercial or visit ljhcommercial.com.au.
 

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