Bawdens Research in Issue 144 of Industrial Property News revealed that across the firms 775,000m2 of Assets under management in Sydney (AUM), less than 2% of the total square metres was available for lease in February, somewhat obviously, this has come about because demand continues to exceed supply, but why?
Despite the post Covid economic rebound the nature of industrial real estate occupier demand is a physical market driver that is having a large impact on the performance of this asset class.
The way in which industrial property is being used is shifting over time. Until recently the type of changes by users were confined to larger corporates using institutional grade industrial assets. However, recently the pandemic accelerated the growth in online retailing producing different impacts upon SME’s using industrial space also.
Whilst shopping centre retail returns were challenged by lock down periods and further challenged by the shift from bricks and mortar to online retail platforms. Rental pricing power consequently in that sector remains subducted in 2022.
Currently industrial property and logistics as a sector produced returns that reached their highest level on record, most notably outpacing inflation by a large amount.
Further growth in returns is expected from this sector as availability of serviced land continues to constrain supply. Rental growth is also set to be further supported as rising interest rates increasingly lead aspirational owner occupiers to realise leasing is a more cost effective means to solve changing accommodation needs for a growing business.
These dynamics are set to preserve and grow industrial property rental pricing power for investors, providing attractive, inflation hedged cash flows in the years ahead.