Industrial & Logistics: Investment Review

ANZ CAPITAL MARKETS | INVESTMENT REVIEW 2021
COLLIERS INTERNATIONAL
Industrial & Logistics
AUSTRALIA & NEW ZEALAND Investment Review 2021 1
Against a backdrop of changing economic conditions, Australian Despite the significant depth of capital and an increase in investment volumes in
2020, the market was constrained by fewer assets being brought to market with a
industrial and logistics assets remain well sought after with
26.9 per cent fall in the number of assets sold in 2020 when compared to 2019. Sales
$5.49 billion trading in 2020 (>$10 million), up 11.5 per cent from volumes by number were at their lowest level since 2012.
2019.
Beyond the macro themes, investment allocations to the sector have risen
The strong level of investment recorded for the year has come off the back of robust significantly with several major institutions seeking to reweight their portfolios
fundamentals within the sector including e-commerce growth, food logistics and and gain further exposure to the industrial and logistics sector. This led to several
infrastructure investment. In tandem with a deeper pool of capital as new entrants significant capital raisings in 2020, many of which were oversubscribed and included
into the market emerge, the sector has been brought to the forefront in 2020 and Charter Hall (CPIF) raising $2.6 billion since April 2020 in two separate raisings.
has outperformed all other mainstream real estate asset classes.
Introduction
Two key themes have emerged in 2020
– flight to quality and sale and leaseback
transactions.
Shifting market dynamics has forced

groups to reassess risk and chase
security and as a result, prime assets
have been highly sought after. Similarly,
2020 Investment Volumes
5.49B
In a year when volumes for other commercial sectors corporates who own their warehouses
have fallen sharply, 28.5 per cent of investment are increasingly taking advantage of
volumes in 2020 (across office, retail and industrial)
stemmed from the industrial and logistics sector, well $ strong market fundamentals via a sale
and leaseback strategy.
above the 15.4 per cent recorded in 2019. 11.5%
Introduction | Key Findings | Thought Leadership | Investment Outlook | NZ Overview | Valuation Outlook | Real Estate Management Outlook | Supply Chain & Logistics Strategy | Transactions 2020 | Authors/Team 2
National Industrial and Logistics Investment Volumes (>$10 million)
Industrial and Logistics Sales
8 250
$5.49 billion of industrial and logistics assets traded in 2020, up 11.5 per
BILLIONS ($AUD)
cent from the level recorded in 2019. While volumes have increased, 7
200
there was a 26.9 per cent fall in the number of assets to trade over the 6
year. In 2020, 106 assets traded, down from 145 in 2019.

5
150
100
Volume By Number (RHS) 3
2
50
Key Findings
0 0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
State Snapshot
The East Coast states captured 91.6 per cent of investment volumes in QLD
2020, up from 85.0 per cent in 2019. Victoria accounted for the largest WA $ 1.3B
share at 37.7 per cent despite the strict COVID-19 lockdown restrictions $170M
SA
imposed on the state.
291M
$
NSW
Average Deal Size
$ 1.66B
NSW - $66.3 million QLD - $41.9 million WA - $42.7 million
VIC
VIC - $54.5 million SA - $36.4 million $2.1B
Source of Capital and Vendor Profile PRIVATE OTHER
11% 1%
Domestic institutions were the largest buyer group in 2020, accounting

for 78.0 per cent of investment volumes for the year. The dominance of
domestic institutions was prevalent across all states.
OFFSHORE INSTITUTION
10% 78%
Offshore investors remained active in 2020, however, their share of total TRANSACTIONS
VOLUME
investment volumes has fallen from 28.9 per cent in 2019 to 10.0 per
BY PURCHASER TYPE
cent in 2020. The lower proportion is the result of travel restrictions and
an increased participation in the market via a local manager.
The vendor profile in 2020 was been underpinned National Industrial and Logistics Top Buyers and Sellers
by Corporate groups, the bulk of which have been
Top Buyers Top Sellers
sold via a sale and leaseback arrangement. 58.2
Volume Number of Assets Volume Number of Assets

per cent of assets to trade by volume stemmed
Charter Hall $1,808,417,593 17 ALDI $929,500,000 6
from Corporates while 18.7 per cent came from
Centuria $693,728,000 9 Telstra $416,700,000 1
institutional vendors and included Charter Hall
Logos $293,700,000 4 QUBE Logistics $268,300,000 2
(Drystone Industrial Estate) and GPT (16-28 Quarry
Aliro $292,500,000 3 Owens-Illinois Australia $214,567,593 3
Road, Stapylton).
GPT $202,200,000 3 Blackstone $209,000,000 2
Dexus $173,500,000 2 Frasers $182,100,000 2
DWS $152,500,000 1 Sigma $172,000,000 2
Mapletree $135,250,000 2 Toyota $170,500,000 1
Fife Capital $123,200,000 3 Time & Place $129,144,860 2
Primewest $112,150,000 3 Charter Hall $127,600,000 1
Colliers International collects every transaction in the market over $5 million and can provide an in-depth analysis of each.
Sale and Leaseback National Industrial and Logistics - Sale and Leaseback Transactions
Given increased pressure on balance sheets, many industrial businesses 3.0
BILLIONS ($AUD)
$2,670m
are reassessing their capital needs to support their long-term growth. For
2.5
this reason and coupled with the strength of the industrial and logistics
investment market, sale and leaseback transactions have been an integral
2.0
factor within the investment market in 2020.
1.5 $1,367m
Sale and leaseback transactions represented almost 50.0 per cent of

investment volumes in 2020 with just over $2.6 billion trading via this 1.0
$712m
arrangement. By comparison, approximately $1.4 billion in sale and
0.5 $394m
leaseback transactions were recorded in 2019, representing around 30.0
per cent of investment volumes for the year. 0
2017 2018 2019 2020
Sale and Leaseback Corporate Profile IT OTHER

6% 9%
In 2020, sale and leaseback activity has stemmed from a diverse corporate
profile. By volume, 37.1 per cent of sale and leaseback assets to trade this year
are from occupiers in the retail industry, followed by manufacturing (28.6 per
PHARMACEUTICAL RETAIL TRADE
cent), transport and logistics (11.4 per cent) and pharmaceutical (8.6 per cent). 9% 37%
SALE AND
LEASEBACK
The strong representation of manufacturing is varied and includes food, glass TRANSACTIONS
BY SECTOR
and packaging related businesses. Major corporates to trade their industrial TRANSPORT
& LOGISTICS
assets include ALDI, DHL, Sigma Pharmaceutical, Telstra, Owens-Illinois 11%

Australia and Border Express.
MANUFACTURING
29%
Portfolio Acquisitions Cold Storage and Food Logistics
Given fewer assets were brought to market in 2020 and the difficulty With investors chasing strong non-discretionary covenants, almost
in obtaining core and core plus assets on their own, portfolio $2.0 billion traded from food backed tenants in 2020 with an
transactions remain highly sought after. Industrial and logistics average deal size of $90.6 million. Of this amount, 65.0 per cent or
portfolio transactions in 2020 amounted to $1.54 billion, down from $1.29 billion traded from supermarkets with ALDI capturing the bulk
the $1.8 billion recorded in 2019. of this following their divestment of six distribution centres across
two tranches.
Major portfolios sold in 2020 include:
Cold storage asset acquisitions totalled $694 million in 2020 across
+ ALDI Portfolio Tranche One: The first tranche of four distribution 10 transactions. Notable sales included:
centres sold for $648 million to Charter Hall/Allianz in June 2020.
The assets were sold on a sale and leaseback basis of seven years + 37-39 Wentworth Street, Greenacre which was acquired by Dexus
and reflected a combined yield of 4.70 per cent; for $100 million on a sale and leaseback from Real Dairy Australia;
+
ALDI Portfolio Tranche Two: The second tranche of two + A 50 per cent interest in 99 Sandstone Place, Parkinson (leased to
distribution centres sold for $281.5 million to Charter Hall/Allianz Coles) which DWS acquired for $152.5 million from Frasers. This
in November 2020. The assets were located in Brisbane and followed DWS first 50 per cent acquisition in 2019 for $134 million;
Melbourne and reflected a combined yield of 4.75 per cent;
+ 342 Hammond Rd, Dandenong South which Charter Hall
+ OIA Portfolio: Charter Hall acquired three assets as part of the purchased for $87.1 million on a sale and leaseback from Australian
Owens-Illinois Australia (OIA) portfolio for $215 million. The assets Meat Group;
located in Melbourne, Adelaide and Sydney provided a GLA of
~146,000 sqm and reflected a combined yield of 5.40 per cent; and + 1 Lahrs Road, Ormeau which was acquired by Centuria for $43
million from ESR with the facility being leased to Markwell Cold
+
Sigma Portfolio: LOGOS acquired two distribution centres Storage; and
from Sigma Healthcare via a 15-year sale and leaseback for a
combined total of $172 million. The assets are located in Sydney +
22 Geddes & 20 Kenhelm Streets, Balcatta which Charter Hall
and Brisbane and the acquisition reflected a combined yield of bought from Stockland for $63.5 million with the facility operating
4.60 per cent. as a dairy processing centre to Brownes Dairy.
BEIJING
Global Prime Industrial 5.3%
and Logistics Yields GERMAN HUBS
3.9%
SEOUL
5.3%
INLAND EMPIRE (USA)
4.5% LONDON TOKYO
SHANGHAI
3.9% 4.0%
NEW JERSEY
5.3%
LOS ANGELES 4.2%
4.5%
HONG KONG
SINGAPORE
5.5% BRISBANE
3.5%
5.4%
PERTH
6.5%
SYDNEY
ADELAIDE
MELBOURNE
6.9% 4.5%
5.1%
Yields Industrial and Logistics Prime Yield Range by City
8.5%
Despite challenging economic conditions, yields for industrial
8.0%
and logistics assets continued to compress throughout 2020.
The tightening of yields in 2020 has been underpinned by the 7.5%
significant weight of capital seeking to be placed within the sector

7.0%
with groups having to be aggressive in order to secure assets.
6.5%
On average, 41 basis points of compression has been recorded 6.0%
nationally in the prime market over the year compared to 20 basis

5.5%
points in the secondary market. The outperformance of the prime
5.0%
market is the result of the flight to quality thematic as groups place
a premium on prime assets backed by a strong covenant. 4.5%
4.0%
SYDNEY MELBOURNE BRISBANE ADELAIDE PERTH
State Overview
NEW SOUTH WALES VICTORIA

TOTAL SALES TOTAL SALES TOTAL SALES TOTAL SALES
2020 2019 2020 2019
$ 1.66B $1.75B $ 2.1B $1.1B

SA WA
5% 3% Investment volumes in 2020 across New South Almost $2.1 billion has traded across the Victorian
Wales totalled almost $1.66 billion across 25 assets, industrial market in 2020. Similar to the trends
representing an average value of $66.3 million. recorded in 2019, fewer assets have been brought to
Compared to 2019, investment volumes are down 5.2 market in 2020 with 38 assets trading, with the largest
per cent in 2020 from the $1.75 billion last year and being Centuria’s acquisition of the Telstra data centre
is the result of fewer assets being brought to market. at Clayton for $416.7 million. At an average value of
Institutional investors (including offshore groups) $54.5 million, compared to $28.3 million in 2019, a
QLD NSW remain heavily focussed on the Sydney market and large share of the transactions to trade in 2020 were
24% 30% have acquired 91.0 per cent of assets by volume and prime assets.
TRANSACTION
VOLUMES 64.0 per cent of assets by number. Alternatively,
SHARE BY STATE corporates have represented 76.5 per cent of vendors Other major sales in Victoria included ALDI
by volume in 2020 with almost $1.3 billion trading. Dandenong South (bought by Charter Hall/Allianz for
$158.6 million), Ford Mickleham (acquired by Dexus
Major acquisitions in 2020 has included Charter Hall for $73.5 million), ALDI Derrimut (bought by Charter
acquiring Culverston Road, Minto ($207.0 million from Hall/Allianz $133.75 million), Drystone Industrial
QUBE Logistics), ALDI Prestons (acquired by Charter Estate (bought by GPT for $127.6 million including
Hall/Allianz for $175.4 million), 13 Endeavour Road, vacant land) and 342 Hammond Rd, Dandenong South
Caringbah (bought by Aliro for $170.5 million) and (acquired by Charter Hall for $87.1 million).
VIC Sigma Kemps Creek (bought by LOGOS for $133.6
38% million). The confluence of few assets for sale and significant
levels of demand has led to further compression in
Recent sales indicate yield compression for selected yields in 2020, albeit concentrated within the prime
core markets. Yields currently range between 4.25 per market. Prime yields currently range between 4.50 per
cent and 5.00 per cent for prime and 4.75 per cent cent and 5.75 per cent while the range for secondary
and 6.00 per cent for secondary grade assets. assets is higher at 5.25 per cent to 7.00 per cent.
State Overview
QUEENSLAND SOUTH AUSTRALIA WESTERN AUSTRALIA

TOTAL SALES TOTAL SALES TOTAL SALES TOTAL SALES TOTAL SALES TOTAL SALES
2020 2019 2020 2019 2020 2019
$ 1.3B $1.6B $ 291M $324M $ 171M $105M

Investment sale volumes in Queensland have fallen Eight transactions above $10 million were recorded in Just four assets above $10 million have traded in
in 2020 with almost $1.3 billion trading in the year, South Australia in 2020, totalling $291.2 million, with 2020 in Western Australia with investment volumes
compared to $1.6 billion in 2019. Notwithstanding an average deal size of $36.4 million. Two transactions for the period totalling $170.9 million. However, this
this, four assets above $100 million have traded this have been sale and leasebacks, totalling just over $80 surpasses the level recorded in 2019 where volumes
year in Brisbane - ALDI Brendale (bought by Charter million. totalled $105.4 million. Two major transactions were
Hall/Allianz for $132.5 million), ALDI Stapylton (bought recorded and were Channel 7 West Perth, Osborne
by Charter Hall/Allianz for $147.75 million), 338 The buyer profile for $10 million + assets (by volume) Park ($75 million) and Stockland’s divestment of the
Bradman Street, Acacia Ridge (acquired by Mapletree has been dominated by institutions at 84.4 per cent Balcatta distribution centre - 22 Geddes & 20 Kenhelm
for $114 million) and the remaining 50 per cent (including offshore institutions) and includes Charter Streets, Balcatta ($63.5 million) to Charter Hall.
stake in the Coles cold storage distribution centre at Hall and Primewest. The largest asset to trade this
Parkinson (bought by DWS for $152.5 million). year in South Australia was the Rand Distribution Despite just four assets trading, demand remains
Centre at Direk which sold to Moelis in August for elevated, evidenced by the sales campaign of the
Yields have compressed by almost 50 basis points $63.05 million. Other major trades include 617 – 625 Balcatta distribution centre where there were eight
in the prime market and 38 basis points in the Port Road, West Croydon ($59.1 million) which sold bids received at the close of round one and included
secondary market in 2020 and reflects significant to Charter Hall as part of the OIA portfolio and the institutional, offshore and private capital.
levels of demand given the more elevated yield sale and leaseback of the Border Express distribution
metrics when compared to the southern states. centre at Salisbury South to Primewest ($22 million). Yield compression of 38 basis points has been
The sale of the above mentioned Coles cold storage recorded in the prime market in 2020 and currently
distribution centre provides evidence of the Reflecting the depth of capital, prime yields have average 6.52 per cent. For the secondary market,
compression recorded in 2020 - The first 50 per cent compressed by 47 basis points over the past year more modest compression has been recorded
stake was acquired by DWS in mid-2019 on a yield to average 6.97 per cent while 19 basis points of (27 basis points) over the same period with yields
of 5.63 per cent ($134.2 million) while the remaining compression has been recorded for secondary assets currently averaging 7.70 per cent.
50 per cent sold on a yield of 5.11 per cent ($152.5 to average 8.94 per cent.
million), reflecting 52 bps of compression over the

year.
The food and grocery sector in Australia has continued to record
strong growth amid changing economic conditions as consumers
became more cautious in their spending patterns and shifted
towards consumer staples.
Thought Leadership
Food Logistics
Changing consumer preferences towards online grocery and food platforms in 2020 has
resulted in strong occupancy demand from occupiers in the food subsector as these
businesses have continued to perform well.
2020 Retail Food Spend
44%
Since the beginning of 2020, prior to the panic induced buying in March 2020,
expenditure on food items has risen by 11 per cent, well above the 2.8 per cent recorded
for the corresponding period in 2019. In 2020, 44 per cent of every retail dollar spent in
Australia was on food items, well above the 7 per cent spent on clothing and the 19 per
cent spent on household goods. If you factor in spending at cafes and restaurants, the
proportion rises to approximately 55 per cent or almost $175 billion per annum.
In recent times, the food logistics industry has continued to While growth in domestic food consumption has risen sharply, Australia currently
exports around two thirds of all food produced, totalling $48 billion, with Asia being
be a positive thematic for the industrial and logistics sector
the primary market.
as people need to eat regardless of the economic climate that
surrounds them. In addition to this, the outlook for further growth in food exports, off the back of
the recently announced Regional Comprehensive Economic Partnership which
While a contraction of 5 per cent was recorded in spending at cafes and restaurants represents a free trade agreement between 14 Asia Pacific nations including
in 2020 as many were forced to close, this fall was offset by significant growth in Australia, demand for industrial space from food occupiers will increase further. This
food expenditure at supermarkets over the same period. Given the resilience and growth will stem from both manufacturers and wholesalers as well as transport and
perceived ‘recession proof’ nature of this industry, there has been strong demand in storage providers in the cold storage and ambient warehouse sectors.
2020 from investors seeking assets anchored by food-based tenants.
Online food sales National Online Food Sales, YoY Growth
100%
Online food sales only represent 5.2 per cent of total 90%
retail sales, however, this is up from 1.6 per cent in 2015 80%
with growth of 30.8 per cent per annum being recorded 70%
over the past five years. By comparison, online retail sales

60%
excluding food represents 16.8 per cent of all retail sales
50%
and highlights the enormous growth potential of online
40%
food sales.
30%
For the major supermarkets of Woolworths and Coles, 10%
online grocery sales represent only a small portion of 0%
NOV 14
MAY 15
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total sales (around 5.5 per cent for Woolworths and 3.9
per cent for Coles) and as a result, the bulk of online
orders are currently serviced via their existing retail store SOURCE ABS
network. However, the fragilities of this were brought to

the forefront when COVID-19 hit with both Woolworths Online Food & Non-Food Share of Total Retail
and Coles suspending home delivery and in-store pick
25%
up for a period of time as they struggled to keep up with
demand. Online grocery sales jumped by over 45 per cent 20%
in the last few weeks of February and early March alone

which placed significant pressure on delivery networks and 15%
supply chains.
10%
5%
0%
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Food Non-Food
SOURCE ABS
Home Delivery Platform Spending
$ 750M
Not all this growth has been recorded at supermarkets with strong demand also coming from meal delivery kits and online food delivery platforms. The
meal kit segment of the market is currently valued at $300 million annually in Australia and significant growth has been recorded in 2020. Two of the larger
operators in this space, Marley Spoon and Hello Fresh, have both recorded growth in excess of 85 per cent over the past year. Given they remain in the
early phase of adoption, the segment still has a significant growth opportunity and operators are expected to seek investment to expand their operational
scale over the next five years.
For convenience-based home delivery food orders such as Uber Eats and Deliveroo, growth of 81 per cent per annum has been recorded over the past five
years with Australians spending over $750 million on such platforms.
Looking ahead, online food sales are forecast to grow significantly over the
next decade and as a result, major food retailers and delivery platforms
are expected to invest significantly in their online fulfilment capabilities
to build resiliency in their supply chains. For the supermarkets, this will
mean a greater take-up of automation within their warehouses and further
rollout of dark stores while online takeaway food retailers are expected to
make further investments in dark kitchens in infill locations close to major
population centres.
These trends have already occurred to some extent in recent years with
Woolworths operating multiple dark stores and temporarily converting
three existing supermarkets in Victoria to dark stores to cater towards
online grocery orders when Melbourne entered stage 4 lockdowns.
Woolworths has also more recently opened its third dark store in
Sydney (Lidcombe – 15,000 sqm) which will enable them to boost online
distribution capacity of their groceries by almost 20 per cent while they
continue to invest in micro fulfilment centres at the back of or close to their
existing supermarkets.
Similarly, both Woolworths and Coles have pre-committed to several

significant facilities in 2020 with the aim to improve efficiencies through
automation. This included Woolworths pre-committing approximately
75,000 sqm within the Moorebank Intermodal Terminal and Coles pre-
committing to 60,000 sqm across two distribution centres in Sydney and
Melbourne. Likewise, online takeaway and meal kit segments have made
significant investments in their warehouse space and includes Marley
Spoon pre-committing to a 14,200 sqm facility at Wetherill Park and Hello
Fresh pre-committing to 25,000 sqm at the Dexus Horizon 3023 Estate at
Ravenhall in Melbourne’s West.
Implications for the industrial and logistics sector?
Regardless of whether food is bought instore or online, further growth in the demand for food and consumer staples
will have positive implications for the industrial and logistics industry in Australia. Considering that over 90 per cent of
food items go through a warehouse at some stage before reaching the consumer, an increase in food consumption
will generate further requirements for both cold storage and ambient distribution centres.
As flagged in our 2020 Investment Review report, the conversion of retail centres for industrial use is likely to
gather momentum in Australia as warehouse demand in infill locations grows off the back of increased last mile
requirements. Occupiers in the food sector including supermarkets will be likely candidates for this space as they look
to grow their dark store network in medium and high-density locations.
Occupiers in the food manufacturing subsector will also be active as a result of the forecast growth in food
consumption. Highlighting its importance, more than 90 per cent of fresh fruit and vegetables, meat, milk and eggs
sold in supermarkets are domestically produced. Several food manufacturers sold their industrial facilities over the
past two years via a sale and leaseback arrangement in order to fund future business growth and this is a trend we
expect to continue in 2021.
From an investment perspective, given the resilient nature of food, investors will continue to place a premium on
assets backed by a strong food related covenant as they remain focused on tenant security. There have been multiple
examples of this in 2020 and includes the Balcatta Distribution Centre in Perth (22 Geddes & 20 Kenhelm Streets,
Balcatta occupied to Brownes Dairy), 37-39 Wentworth Street, Greenacre in Sydney (occupied by Real Dairy Australia),
1 Lahrs Road, Ormeau in Brisbane (occupied by Seabest International – supplier to Hungry Jacks) and 342 Hammond
Rd, Dandenong South in Melbourne (occupied by Australian Meat Group).
2021 is shaping up as a year of growth and opportunity for the industrial and
logistics market, buoyed by strong fundamentals within the sector which will
continue unabated over the coming year.
We estimate there to be $26 billion in capital looking to be placed in the market and broadly spread
between offshore and domestic institutions as well as private investors. Given that just $5.49 billion
transacted in 2020, it highlights the significant mismatch between supply and demand. This depth of
capital will continue to drive further yield compression in the sector in 2021, albeit concentrated in prime
assets as investors chase security.
Investment Outlook
Capital to be placed in sector Given the dry powder of capital from institutional groups With these factors in mind, and with groups under pressure
26B
off the back of recent capital raising, we expect buyer demand to place capital to meet investment mandates, we expect that
$
for industrial and logistics property will accelerate in 2021. The partnering with other managers will be a growing trend going
risk to this, however, is the availability of assets as institutional forward. We saw a number of instances where this occurred
groups are likely to bring fewer assets to market in 2021 in 2020 and included GIC increasing their partnership with
compared to previous years. As a result, the volume of assets ESR from 45 per cent to 80 per cent, Allianz partnering with
2020 Transactions brought to market in 2021 is expected to originate from Charter Hall and GIC with Dexus. For groups to achieve scale,
5.49B
corporates via sale and leaseback as they continue to take this trend is expected to gather momentum in 2021.
$
advantage of the continued strength of the market. A select
number of portfolios are expected to come to market in 2021
which will generate significat interest from larger institutions
and will boost volumes for the year.
While the COVID-19 pandemic has caused disruption across New
Zealand, the impact on the industrial property sector has been 2020 Sales Volume Estimate
50%
mitigated by a number of factors. Many manufacturing companies
were classified as essential services and therefore permitted to of NZ commercial
and industrial sales
continue to trade, during level three lockdowns, while demand for
services such as storage and distribution increased. Subsequent
to lockdowns, the solid backdrop has been enhanced by New
Zealand’s stronger than expected economic performance.
NZ Overview
Interest rates have fallen from already historically low
The industrial sector’s popularity in periods of market disruption and

levels in 2020, a result of actions taken by the Reserve Bank
uncertainty has resulted in elevated investor interest in 2020, however,
to support the economy during the COVID-19 pandemic,
the lack of stock available to purchase has tempered overall volumes.
primarily quantitative easing measures and the low OCR.
As a result, and like previous years, we project around half of annual
The prospect of interest rates remaining at low levels for an
commercial and industrial sales activity will be in the industrial sector.
extended period has further bolstered interest in industrial
While the impact of COVID-19 on the market will see sales volumes
assets. Competition has resulted in yield compression
dipping from the levels seen over recent years, we project the aggregate
becoming increasingly apparent, particularly within the
value of sales will reach around NZ$9 billion in the year to June 2020,
prime sector. Transactions are frequently commanding
which is not too dissimilar from the $9 billion to $10 billion range
yields of between 4 per cent and 5 per cent while yields of
experienced between 2015 and 2019.
sub-4 per cent have been achieved for premium assets.
Investor sentiment in the industrial sector remains positive, more so than in the
other major commercial property sectors.
Colliers International Research’s latest investor confidence survey shows that the industrial sector generated
a net positive (optimists minus pessimists) rating of just under 39 per cent. In the major centres of Auckland
and Wellington confidence in the sector was greater with net positive ratings of 42 per cent and 52 per cent
respectively. Confidence in the Wellington market has increased significantly over the last five years while
confidence in the Auckland market has been at elevated levels for most of the last decade.
Given current market dynamics the scene appears to be set for an active start to 2021 characterised by a
broad-based renewal of activity, as investors shake off concerns about continuing economic uncertainty to
deploy pent-up capital in high-potential markets and sectors.
Sale Price Sale Price Sale Price
188M 41M 23.5M

$ $ $
259 James Fletcher Drive Tomoana Food Hub 180 – 202 Hutt Road
Auckland Hawke’s Bay Wellington
A 17.2-hectare site was sold for $NZD A food processing and distribution A 10,660 sqm site was sold by listed
188 million to a joint venture group centre occupying a 10.47 hectare site property group Argosy to a private local
of overseas investors LOGOS and the was sold for $NZD 41 million. The investor for $NZD 23.5 million.
Singaporean sovereign wealth fund GIC. purchaser was South Island syndication
company Mitchell Mackersy.
The impacts of COVID-19 in 2020 have been far reaching and the valuation of In terms of the outlook for yields, it remains a
case by case basis. Prime assets will continue
industrial and logistics assets have not been immune to changing market conditions
to remain highly sought after given their
with increased levels of risk needing to be factored into the valuation of assets. more secure cashflows with stronger tenant
covenants and we are forecasting further yield
Notwithstanding this, asset values have been maintained since the outbreak of COVID-19 in Australia
compression in the order of 25 basis points in
in March 2020. While assumptions within the cash flow have been adjusted, including longer letting
2021 for prime facilities. Several prime assets
up assumptions, lower rental growth forecasts and higher incentive forecasts when compared to pre
are currently in due diligence which support
COVID-19, this has been offset by further compression in cap rates. We have seen cap rates compress by
this level of movement. Alternatively, risk is now
30-50 basis points on average depending on the asset and location throughout 2020 with up to 20 basis
being priced appropriately for secondary grade
points of compression being recorded in the second half of 2020.
assets and as a result, we expect secondary
yields will remain stable over the coming 12
Valuation Outlook
months and subsequently the spread between
prime and secondary yields will revert towards
the long-term average.
Prime assets have fared the best in 2020 as investors chase quality and prime assets have
outperformed over the period. Alternatively, secondary grade asset values with high lease
expiry exposure have been more impacted as risk and more conservative assumptions are
being factored in.
From a land perspective, land rates have generally held stable in 2020 while there is
evidence towards the end of 2020 that upward pressure is occurring. After pulling back
on their developments through the middle of 2020, developers have since returned to the
market and are progressing ahead with their development programs, particularly on a
speculative basis.
Negotiating rent relief and proactive actions
2020 represented a challenging year for many industrial occupiers and negotiating rental Most larger operators in logistics didn’t fall under the Code of Conduct. This means
relief quickly became a priority as changing market conditions forced businesses to adapt. that many business provisions didn’t apply because of the scale of operation, however,
While these requests have been assessed on a case by case basis, there are alternate there has been some leeway. Major industrial landlords have approached their
ways for landlords to provide relief to tenants without additional rental rebates, which tenants and discussed rent reduction plans but are instead re-negotiating lease
have been both cost-effective and sustainable in maintaining a partnership between contracts. Landlords are pushing incentives for their occupiers at the forefront and as
tenants and landlords. a result, these businesses can have access to assistance now, just by shuffling around
immediate action to unlock rent-free periods.
Real Estate Management Outlook

While there have been challenges, the industrial and logistics sector has proven
to be the most resilient with rental collections for landlords of industrial property
remaining high. This has been particularly true when compared to other sectors
where the impacts of shifting market dynamics have been more widespread. Most
Australian REITs reported rent collections on their industrial assets in excess of 90
per cent since COVID-19 first emerged at the end of the first quarter in 2020.
Looking ahead, while vacancy rates in most capital cities are trending lower as leasing
demand has remained robust, landlords still need to be proactive with regards to any
impending vacancies. In the current climate, it is suggested that:
Negotiations with the sitting tenant If little traction is occurring with the
occur early to ensure the best chance sitting tenant, quantify the make good
of renewal; as the costs associated with moving
can often be prohibitive;
Explore whether there are any building Be aware of any competing stock and
upgrades that would help keep the have a thorough understanding of
current sitting tenant or entice new current market incentives. This can be
occupiers to the site; and achieved by talking to your local agent.
This year disruptions have resurfaced Flexible Logistics Partnerships
the need for supply chain managers to
Warehousing and shipping companies, of all participants in supply chain, are re-thinking their value as supply
re-think their supply chains and strategy chain service providers and requested to consider increased flexibility in their offering. Logistics start-ups are
roadmaps. The following topics are the designing innovative concepts like crowd shipping platforms and flexible warehousing arrangements in response
trends at the top of the agenda: to the entrance of the sharing economy to the logistics industry. Risks are shared between the service provider and
customer, short term contracts are increasingly popular, also finding new partners and wider network of logistics
providers is on the cards to achieve lowest cost and greater supply chain resilience. The on-demand and flexible
logistics offering for both warehousing and transport services is needed to support sudden fluctuations of demand
and supply volume as well as inventory that require variable and often only temporary storage requirements.
Supply Chains & Logistics Strategy

Supply Sourcing
Recent events have challenged traditional product sourcing strategies that typically work with only a
single product origin. Product supply and overall supply chain resilience has been impacted by recent
events, forcing procurement managers to discover less conventional solutions when ordering raw
materials and finished goods from suppliers spread over global geographies. Local vs overseas sourcing
is being brought back to the discussion table as well as the dual sourcing (more than one supplier
source) to increase reliability. Nearshoring (outsourcing in a nearby country) is also an option for faster
shipping. Manufacturers, on the other hand, are also re-evaluating where to base their infrastructure in
order to move their products closer to the end market/consumer. This is likely to lead to a more regional
approach to sourcing.
Modern logistics practices
All the operations inside warehouses and across road, air and sea networks represent
most of the supply chain costs and deserve all the attention. Supply chain managers need
to continuously transform and re-design their logistics operations to exceed previous
year efficiency targets. Scalable automation, digital solutions, flexible labour resourcing,
flexible carrier selection, and cross-company collaboration are some of the modern
examples of logistics practices that achieve more responsive, efficient, malleable and cost-
controlled operations. It’s important to highlight that automation and digital operational
management solutions are no longer accessible to only few players with large throughput
volumes; nowadays, these technologies are achieving transformational efficiencies at a
competitive cost and with shorter investment paybacks.
End-to end visibility

Visibility is a hot topic for 2021, as it is a key priority in most strategic road maps of In a highly visible supply chain, trends can be analysed; disruptions can be
major industries across the globe. The visibility concept encompasses the ability for predicted, and optimisation can be rolled out much faster, given scenarios
participants in the supply chain to track, trace, analyse and make crucial decisions while can be simulated and action plans designed according to replicated results.
the supply chain and its participants are performing their typical activities. A transparent Risk mitigation strategies can also be drawn from scenario planning and
supply chain allows the digital visualisation of physical activities and information partner evaluation to identify potential risks and consequences. Modern
flows through technology-enabled platforms that allow interpretation, analysis and and technology-driven solutions are increasingly effective to manage the
predictability of outcomes. common problems experienced by supply chain managers during this year
of disruptions. The action plans and solutions mentioned in this article are
becoming increasingly used as answers to increase resilience, efficiency
and flexibility across logistics and supply chain operations.
Australia & New Zealand
Transactions 2020
Australian Industrial Investment
Transactions 2020
Transactions above $50 MILLION (AUD)
Address State Date Price Sale Type Yield Capital Value $/m² WALE Vendor Purchaser
Telstra Data Centre, Clayton VIC Aug-20 $416,700,000 Sale & leaseback 4.20% $15,948 30.0 Telstra Centuria
Culverston Road, Minto NSW Jul-20 $207,000,000 Investment 4.76% - 4.2 QUBE Logistics Charter Hall
1 Sargents Road, Minchinbury (Aldi Portfolio - Tranche 1) NSW Jun-20 $181,500,000 Sale & leaseback 4.75% $3,225 7.0 ALDI Charter Hall/Allianz
10 Burando Road, Prestons (Aldi Portfolio - Tranche 1) NSW Jun-20 $175,400,000 Sale & leaseback 4.58% $3,127 7.0 ALDI Charter Hall/Allianz
13 Endeavour Road, Caringbah NSW Mar-20 $170,500,000 Investment VP $3,863 V/P Toyota Aliro
41-59 Colemans Road, Dandenong South (Aldi Portfolio - Tranche 1) VIC Jun-20 $158,600,000 Sale & leaseback 4.30% $2,788 7.0 ALDI Charter Hall/Allianz
99 Sandstone Place, Parkinson (50%) QLD Aug-20 $152,500,000 Investment 5.11% $2,811 12.0 Frasers DWS
55 Burnside Road, Stapylton (Aldi Portfolio - Tranche 2) QLD Oct-20 $147,750,000 Sale & leaseback 4.75% $2,686 7.0 ALDI Charter Hall/Allianz
60 Swann Drive, Derrimut (Aldi Portfolio - Tranche 2) VIC Oct-20 $133,750,000 Sale & leaseback 4.75% $2,591 7.0 ALDI Charter Hall/Allianz
2 Imperata Cl, Kemps Creek NSW Aug-20 $133,600,000 Sale & leaseback 4.48% $3,236 15.0 Sigma LOGOS
68 Kremzow Road, Brendale (Aldi Portfolio - Tranche 1) QLD Jun-20 $132,500,000 Sale & leaseback 5.00% $2,693 7.0 ALDI Charter Hall/Allianz
Drystone Industrial Estate VIC Nov-20 $127,600,000* Investment 4.19% $2,891 8.2 Charter Hall GPT
40 Lockwood Road, Erskine Park NSW May-20 $115,000,000 Investment 4.50% $2,669 10.5 Kador Charter Hall
338 Bradman Street, Acacia Ridge QLD Oct-20 $114,000,000 Investment 5.02% $2,072 5.2 Blackstone Mapletree
37-39 Wentworth Street, Greenacre NSW Jul-20 $100,000,000 Sale & leaseback 4.53% $5,196 13.5 Lederer Dexus
1502 Beaudesert Road, Acacia Ridge QLD Oct-20 $95,000,000 Investment 4.72% $1,235 3.1 Blackstone ESR
130-170 Andrews Road, Penrith (OIA Portfolio) NSW Jul-20 $88,378,784 Sale & leaseback 5.12% $1,737 20.0 Owens-Illinois Australia Charter Hall
342 Hammond Road, Dandenong South VIC Dec-20 $87,100,000 Sale & leaseback 4.36% $4,067 20.0 Australian Meat Group Charter Hall
225-295 Western Road, Kemps Creek NSW May-20 $83,000,000 Sale & leaseback 3.49% $7,323 15.0 Elanco Jade Land International
Polaris Road, Mickleham (ex. Kaufland) VIC Nov-20 $83,000,000 Investment - $922 10.0 Kaufland Fife Capital
Channel 7 West Perth, Osborne Park WA Apr-20 $75,000,000 Sale & leaseback 5.73% $1,761 15.0 Channel 7 Primewest
Ford - Merrifield Business Park VIC Jul-20 $73,500,000 Investment 5.25% $1,425 10.0 MAB Dexus
Address State Date Price Sale Type Yield Capital Value $/m² WALE Vendor Purchaser
67-69 Mandoon Road, Girraween NSW Nov-20 $73,128,000 Sale & leaseback 5.13% $2,877 7.0 Bidfood Centuria
1122-1136 Port Wakefield Road, Salisbury SA Dec-20 $72,000,000 Investment - $3,361 - Soilbuild REIT Blackstone
415 Cooper Street, Epping VIC Jan-20 $71,500,000 Investment 5.47% $1,554 3.0 Time & Place Logos
500 Green Road, Crestmead QLD Dec-20 $70,300,000 Fund Through 5.60% $1,819 2.5 Goodman Ascendas
520 Gardeners Road, Alexandria NSW Jan-20 $70,000,000 Investment 3.33% $8,534 5.0 Private Investor Charter Hall
2 - 38 Hudsons Road, Spotswood (OIA Portfolio) VIC Jul-20 $67,096,303 Sale & leaseback 5.12% $1,497 20.0 Owens-Illinois Australia Charter Hall
385-397 Francis Street, Brooklyn VIC Mar-20 $65,000,000 Sale & leaseback - $2,955 0.5 QUBE Logistics Time & Place/MaxCap
48 Assembly Drive, Dandenong South VIC Jul-20 $64,000,000 Sale & leaseback 4.22% $1,140 5.0 GMA Holden Aliro
22 Geddes & 20 Kenhelm Streets, Balcatta WA Jul-20 $63,500,000 Investment 5.72% $2,406 14.0 Stockland Charter Hall
16-26 Caribou Drive, Direk (Rand Distribution Centre) SA Aug-20 $63,050,000 Investment 5.69% $5,673 15.0 Cromwell Funds Management Moelis
16-28 Quarry Road, Stapylton QLD Dec-20 $62,520,000 Investment 5.94% $1,526 3.3 GPT APN Industria REIT
617 - 625 Port Road, West Croydon (OIA Portfolio) SA Jul-20 $59,092,506 Sale & leaseback 6.12% $1,173 20.0 Owens-Illinois Australia Charter Hall
427-451 Somerville Road, Tottenham VIC Apr-20 $58,000,000 Investment - $2,320 1.3 Cadence Property Group Aliro
151 Leakes Road, Truganina VIC Dec-20 $57,644,860 Fund Through 5.35% $1,495 3.0 Time & Place Stockland
DHL Altona VIC Jun-20 $55,450,000 Sale & leaseback 4.75% $1,658 10.0 DHL Charter Hall
VISY Epping (Biodiversity Business Park) VIC Jul-20 $55,000,000 Sale & leaseback - $1,582 10.0 VISY Charter hall
120 Northcorp Boulevard, Broadmeadows VIC Aug-20 $50,200,000 Vacant Possession VP $836 VP Growthpoint LOGOS
Total Industrial AU (>$10 million) $5,488,648,453

Colliers International collects every transaction in the market over $5 million and can provide an in-depth analysis of each.
*Inclusive of vacant land.
VP refers to Vacant Possession
New Zealand Industrial Investment
Transactions 2020
Transactions above $20 MILLION (NZD)
Address City Price Transaction Date Initial Yield Vendor Vendor Origin Purchaser Purchaser Origin
259 James FletcherDrive Auckland $188,000,000 2020 3.50% Toll Group Offshore LOGOS JV GIC Offshore
752 Great South Road Auckland $178,300,000 2020 4.90% Visy Offshore Augusta Capital (Centuria) Offshore
8-14 Mount Richmond Drive & 2-4 Doroval Place Auckland $76,000,000 2020 - Confidential Confidential Argosy Property Trust Onshore
528-532 Rosebank Road Auckland $65,550,000 2020 5.20% Confidential Confidential Property For Industry Onshore
171 Pilkington Road Auckland Confidential 2020 - Confidential Confidential Confidential Confidential
147 Elwood Road Hastings $41,000,000 2020 6.23% Elwood Road Holdings Limited Onshore ARM One Hundred Thirty Seven Limited Onshore
5 Reliable Way Auckland $25,375,000 2020 5.52% Fortis NZ Limited Onshore Silverfin Acquisitions Limited Onshore
180 - 202 Hutt Road Wellington $23,500,000 2020 - Argosy Property Trust Onshore Maaiwa Properties Limited Onshore
2-14 Patiki Road Auckland $22,502,914 2020 5.82% Valspar Sherwin Williams NZ Offshore Stride Property Onshore
Total Industrial NZ $620,227,914
SOURCE CoreLogic, Colliers International Research

Authors NSW Authors QLD
Gavin Bishop Sean Thomson Luke Crawford Monica Velez Simon Andreatta Daniel Shafferman
NSW, SYDNEY NSW, SYDNEY NSW, SYDNEY NSW, SYDNEY NSW, SYDNEY QLD, BRISBANE
Head of Capital Markets | Industrial Director Director National Director Head of Industrial Valuations National Director
+61 401 146 051 +61 418 943 452 +61 2 9257 0296 +61 2 9840 0229 +61 2 9840 0285 +61 406 499 801
Gavin.Bishop@colliers.com Sean.Thomson@colliers.com Luke.Crawford@colliers.com Monica.Velez@colliers.com Simon.Andreatta@colliers.com Daniel.Shafferman@colliers.com
Authors
Team NZ
Chris Dibble
NZ, AUCKLAND
National Director |
Colliers Partnerships,
Research & Communications
+64 21 242 9447
Chris.Dibble@colliers.com
Team NSW Team VIC
Gavin Bishop Sean Thomson Alysia Reilly Nick Saunders Gordon Code Hugh Gilbert
NSW, SYDNEY NSW, SYDNEY VIC, MELBOURNE VIC, MELBOURNE VIC, MELBOURNE VIC, MELBOURNE
Head of Capital Markets | Director National Director | Industrial National Director | Industrial Director | Industrial National Director | Industrial
Industrial +61 418 943 452 +61 487 576 881 +61 407 542 210 +61 425 710 666 +61 409 730 858
+61 401 146 051 Sean.Thomson@colliers.com Alysia.Reilly@colliers.com Nick.Saunders@colliers.com Gordon.Code@colliers.com Hugh.Gilbert@colliers.com
Gavin.Bishop@colliers.com
Team
Team VIC Team QLD Team SA Team WA
Daniel Telling Patrick Rooney Simon Beirne Paul Tierney Greg O’Meara
VIC, MELBOURNE VIC, MELBOURNE QLD, BRISBANE SA, ADELAIDE WA, PERTH
Executive | Industrial Executive | Industrial State Chief Executive | Queensland National Director | Industrial Director | Industrial Agency
+61 427 746 472 +61 433 011 596 National Director | Industrial +61 401 145 028 +61 434 659 842
Daniel.Telling@colliers.com Patrick.Rooney@colliers.com +61 413 765 098 Paul.Tierney@colliers.com Greg.O’Meara@colliers.com
Simon.Beirne@colliers.com
DISCLAIMER
Colliers International does not give warranty in relation to the accuracy of the information contained
in this document. If you intend to rely upon information contained herein, you must take note that
the information, figures and projections have been provided by various sources and have not been
verified by us. we have no belief one way or the other in relation to the accuracy of such information
and figures. Colliers International will not be liable for any loss or damages resulting from figure,
calculation or any other information that you rely upon that is contained in this document.
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ANZ CAPITAL MARKETS | INVESTMENT REVIEW 2021

Shifting market dynamics has forced

year. In 2020, 106 assets traded, down from 145 in 2019.

VIC - $54.5 million SA - $36.4 million $2.1B

Domestic institutions were the largest buyer group in 2020, accounting

Volume Number of Assets Volume Number of Assets

Dexus $173,500,000 2 Frasers $182,100,000 2

DWS $152,500,000 1 Sigma $172,000,000 2

Mapletree $135,250,000 2 Toyota $170,500,000 1

Fife Capital $123,200,000 3 Time & Place $129,144,860 2

Primewest $112,150,000 3 Charter Hall $127,600,000 1

Given increased pressure on balance sheets, many industrial businesses 3.0

Sale and leaseback transactions represented almost 50.0 per cent of

Sale and Leaseback Corporate Profile IT OTHER

assets include ALDI, DHL, Sigma Pharmaceutical, Telstra, Owens-Illinois 11%

4.60 per cent. as a dairy processing centre to Brownes Dairy.

Yields Industrial and Logistics Prime Yield Range by City

significant weight of capital seeking to be placed within the sector

nationally in the prime market over the year compared to 20 basis

NEW SOUTH WALES VICTORIA

$ 1.66B $1.75B $ 2.1B $1.1B

QUEENSLAND SOUTH AUSTRALIA WESTERN AUSTRALIA

$ 1.3B $1.6B $ 291M $324M $ 171M $105M

million), reflecting 52 bps of compression over the

over the past five years. By comparison, online retail sales

For the major supermarkets of Woolworths and Coles, 10%

online grocery sales represent only a small portion of 0%

network. However, the fragilities of this were brought to

demand. Online grocery sales jumped by over 45 per cent 20%

in the last few weeks of February and early March alone

Similarly, both Woolworths and Coles have pre-committed to several

expect to continue in 2021.

The industrial sector’s popularity in periods of market disruption and

Sale Price Sale Price Sale Price

188M 41M 23.5M

Real Estate Management Outlook

Supply Chains & Logistics Strategy

End-to end visibility

Total Industrial AU (>$10 million) $5,488,648,453

VP refers to Vacant Possession

Total Industrial NZ $620,227,914

SOURCE CoreLogic, Colliers International Research

AUSTRALIA & NEW ZEALAND Investment Review 2021 30

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