industrial estate area close to highway
Image – Canva.
  • Valuations rose by 11.9%
  • NTA rose as a result, up 30 cents
  • eCommerce and B2C one of several factors driving market

Industrial and business park asset company APN Industria REIT (ASX: ADI) saw the value of 17 of 23 industrial properties in the portfolio surge.

Up by $64.3 million or 11.9%, the company said, “The average cap rate compressed by 51 basis points, and the weighted average cap rate across the portfolio is now 5.83%.”

The company had negative cap rate compression on a number of its properties across the east coast as seen below.

APN Industria REIT property valuations and cap rate compression

market-caprate-book-value-valuation-apn-industria-reit
Image – APN Industria REIT.

APN also noted the valuations increase “[equates] to approximately 30 cents of Net Tangible Assets (NTA) per security, an increase over the last reported NTA (31 December 2020) of 10.3% to $3.18 per security.”

Industrial real estate has experienced market conditions which has garnered labels such as ‘unprecedented’ and ‘remarkable’ following trends seen over the past year.

The industrial market

A host of changes across 2020 and this year has seen industrial property reach considerable highs.

University of Melbourne’s Professor Piyush Tiwari told The Property Tribune that the industrial cap rate has come down significantly compared to the past four to five years.

CBRE’s Ben Hegerty told The Property Tribune a number of trends drove the shift:

“There has been a functional shift in the industrial and logistics space in general with the adoption of eCommerce, B2C distribution, supply chain sophistication and on shore manufacturing, all culminating in a market that is attractive to top tier investors.”

Ben Hegerty, CBRE Senior Director, Capital Markets, Industrial & Logistics

That certainly wasn’t the mood in some markets earlier last year though, Professor Tiwari said:

“The industry view was that given lockdown and the move to work from home, people thought office property would not see compression as it is seeing at the moment, but that notion has since been put aside.”

Professor Piyush Tiwari, University of Melbourne

Both Mr Hegerty and Professor Tiwari said it was a complex situation.

Mr Hegerty said another compounding issue included “land constraints in each of the major markets and demand like we have never seen from occupiers will see the competition for facilities drive rents rapidly across each state”.

Professor Tiwari added that significant investment from overseas continues to pour in given Australia’s qualities as a mature, safe and stable country, a recent deal saw Singaporean company GIC join ESR to purchase just under $4 billion worth of Blackstone’s Milestone Logistics portfolio.

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