centuria woolworths logos
Centuria Industrial REIT (ASX: CIP) extends Woolworths distribution centre lease by five years. Image – Henry Thai.
  • Woolworths extends distribution centre lease by five years
  • CIP NSW portfolio WALE up to 5.9 years, from 3.7
  • Strength in food and logistics saw previous acquisitions of $450M in food related assets

E-commerce accelerated during the pandemic, with industrial and logistics becoming the most desirable class of assets.

That trend is expected to continue into the near future, more recently in retail news, Bunnings took top spot as the best online retailer, over traditional top contenders Woolworths and Coles.

The news

Centuria Industrial REIT (ASX: CIP) recently announced a lease extension on a 54,196 square metre distribution centre in New South Wales.

Located at 2 Woolworths Way, Warnervale, the eponymous Woolworths (ASX: WOW) secured an additional five years at the distribution centre, Centuria said the lease “demonstrated tenant demand for strategic food logistics assets.”

Woolworths has seen share prices consistently rise over the past five years, peaking at $43.45 per share early in the pandemic.

“We see growing market demand for leasing of food logistics assets reflecting increasing consumer demand for fresh food and rise of food-related e-commerce. This is a structural trend we identified when we took over management of CIP in 2017″

Jesse Curtis, CIP Fund Manager

The company was ranked second behind Bunnings in the online retail top 100 awards, nudged out of top spot after DIY took Australia by storm.

The logistics and industrial property market have experienced hitherto unseen strength, APN Industria (ASX: ADI) saw its valuations jump and capitalisation rate compression dive into negative territory.

In some markets like Melbourne, industrial facility vacancy rates were lower than record low residential rates, 0.25% for prime stock.

The lease extension brings the Warnavale distribution centre’s weighted average lease expiry (WALE) to 10.2 years, Mr Curtis said it builds on the company’s “acquisition of $214million worth of cold storage assets and $236million of food manufacturing facilities since FY19”.

Portfolio movements

The company said “Following the Woolworths lease extension, CIP has leased more than 117,890 sqm, or 40% of the NSW portfolio, to date in FY21. This has been complemented with the acquisition of four strategic infill assets in NSW, totalling $142.8 million.”

This lease, among others, has also increased CIP’s NSW portfolio WALE from 3.7 years to 5.9 years; the portfolio in NSW currently includes 17 assets worth $686 million.

“CIP owns 61 investment properties worth more than $2.6 billion with a portfolio Weighted Average Capitalisation Rate (WACR) of 4.95%, an occupancy rate of 98.8% and an overall 9.7-year WALE as at 31 March 2021”.

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