Australian Logistics & Industrial Capital Markets Outlook 2025
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AUSTRALIAN LOGISTICS & INDUSTRIAL CAPITAL MARKETS
VIEW DIGITAL REPORT HERE
CONTENTS 02 INTRODUCTION 04 OUTLOOK: 6 KEY THEMES
08 OUTLOOK TIMELINE 22 AUSTRALIA IN A GLOBAL CONTEXT
10 2024 KEY TRENDS
32 2025 OUTLOOK
LOGISTICS & INDUSTRIAL OUTLOOK 2025
INTRODUCTION
Welcome to the Cushman and Wakefield 2025 Logistics and Industrial (L&I) Capital Markets Outlook report. This report will explore the key themes for the year ahead and our outlook for L&I Capital Markets in light of the current macroeconomic environment.
Australia’s L&I Capital Markets recorded substantial improvements in 2024, evidenced by over 40% year-on year pick-up in investment volumes and increased buyer appetite. The stabilisation of debt costs was the lynchpin behind this improvement, driving improved liquidity and providing greater clarity on where pricing sits. Capital that sat on the sidelines in recent years has become much more active, while there were several new market entrants into the sector, led by capital out of Japan. For 2025, a more dynamic landscape is anticipated against a backdrop of further rate cuts following the 25 basis point reduction in February 2025. The fall in the cash rate represents a pivotal change for capital markets and further market liquidity is expected to follow. Asset values have been reset, and capital now recognises that there is a window of opportunity in the year ahead before a potential yield compression cycle begins. Globally, yields for logistics assets are already compressing in select markets, and there is potential for Australia to follow suit in late 2025, giving rise to a wide range of risk and return opportunities.
The short-term outlook will remain choppy amid broader economic and financial market volatility, although economic green shoots are emerging, including a return to real income growth for consumers and an upward trend of retail sales. However, looking beyond the short-term economic volatility, Australia’s economic fundamentals are expected to continue to outperform comparable markets over the long term, which will have positive impacts on warehouse space requirements and capital flows to the sector. More broadly, the sector continues to benefit from several tailwinds, including increased e-commerce adoption and population growth, while supply and demand fundamentals continue to point to an undersupplied market. This imbalance has the potential to become further pronounced in the
CUSHMAN & WAKEFIELD | 3
TOTAL TRANSACTION VOLUME IN 2024 $7.2bn
FORECAST TRANSACTION VOLUMES FOR 2025 $10.0bn CURRENT NATIONAL WEIGHTED PRIME YIELD 5.85% FORECAST PRIME NATIONAL WEIGHTED YIELD BY DECEMBER 2025 5.65%
second half of 2025 as supply begins to thin, which will drive further income growth over the medium to long term. This thematic, in combination with more favourable pricing dynamics, will underpin investment flows in 2025 as the sector and Australian market remain a preferred location for capital deployment. Capital now has greater conviction, and this is expected to support investment strategies across the risk spectrum in 2025.
Tony Iuliano International Director
Luke Crawford Head of Logistics & Industrial Research - AUS Luke.Crawford@cushwake.com +61 421 985 784
Head of Logistics & Industrial – ANZ Tony.Iuliano@cushwake.com +61 412 992 830
LOGISTICS & INDUSTRIAL OUTLOOK 2025
2025 OUTLOOK
SIX KEY THEMES FOR 2025
01 RBA TO REDUCE RATES FURTHER IN 2025 Against a backdrop of moderating inflation, the RBA is expected to reduce the cash rate further in 2025. While there remains some conjecture around how many cuts will occur in 2025, our base case is for the cash rate to reach 3.60% by year’s end. This scenario will not only support capital markets but also leasing demand as household disposable incomes improve.
02 INVESTMENT VOLUMES TO PICK-UP PACE We anticipate investment volumes for L&I will reach approximately $10.0 billion in 2025, representing an approximate 40% increase on 2024 volumes ($7.2 billion). Even at this level, investment volumes will represent less than 4% of Australia’s total L&I investable universe as assets remain tightly held.
03 CAPITAL SOURCES TO BECOME MORE DIVERSE
While traditional players are expected to remain
active in 2025, new capital sources are
expected to emerge from offshore markets. While this will include traditional dominant markets such as Singapore, Hong Kong and the US, capital inflows are expected to become more pronounced from Japanese and European based capital, many of which have recently undertaken market and sector due diligence.
CUSHMAN & WAKEFIELD | 5
04 PRICING PREMIUMS FOR PORTFOLIOS EXPECTED TO RE-EMERGE Pricing premiums for scale have not been evident over the past two years; however, there is potential for this trend to re-emerge in 2025 given the difficulty in building scale quickly - There have been just 12 trades above $500 million nationally in the L&I sector. The return of this trend will drive further recapitalisation and portfolio activity.
05 INVESTOR MANDATES
06 YIELD COMPRESSION CYCLE TO BEGIN There is the potential for between 10 to 25 basis points of yield compression for the sector in late 2025, before a further 25 to 30 basis point reduction in 2026. For higher barrier to entry markets such as Sydney, yield compression could be brought forward as investors price in further rate cuts in 2025.
EXPECTED TO SHIFT BACK TO CORE Capital appetite for core opportunities started to shift in Q4 2024 and greater liquidity is expected in 2025. The market has reached an inflection point as yields have been reset higher with groups seeking counter-cyclical opportunities with a greater focus on income security. The forecast reduction in debt costs will also be a catalyst behind greater appetite for core assets.
LOGISTICS & INDUSTRIAL OUTLOOK 2025
2025 INVESTMENT STRATEGIES
CORE
VALUE ADD
There will remain attractive opportunities across the
Favourable repricing dynamics are expected to emerge for core assets in 2025 as both interest rates and the risk-free rate move lower, driving greater capital appetite. Unlike the last cycle, when yield compression dominated returns, returns are set to be more evenly balanced in the next cycle. RECOMMENDATIONS Target longer WALE assets linked to structural themes, including facilities with defensive-based covenants. This includes assets where tenants are embedded in basic needs, including supermarkets, cold storage and other food-related occupiers. In previous cycles, these assets have proven to offer a resilient income story. During the last cycle, geography gave way to broader sector growth as the dominant driver of performance, given the sharp rise in e-commerce. However, the new cycle is expected to shift the focus back to geography and real estate fundamentals, given the variance of local supply and demand dynamics across each market.
market to pursue higher returns through refurbishment or asset repositioning and such strategies could deliver mid to high teen returns. Risk under this strategy remains well mitigated as vacancy levels remain well below the market equilibrium. Unlike recent years, supply is expected to thin in 2025 and 2026, particularly on the speculative development front, which will create pockets of opportunity for capital to deliver refurbished product to supply constrained markets. RECOMMENDATIONS Target urban infill locations where assets can be repositioned via capex/refurbishment to drive value and rental uplift. This could include meeting higher ESG credentials, as the average age of stock in infill locations is now over 40 years, while just 8% of current stock was built after 2010
CUSHMAN & WAKEFIELD | 7
CORE PLUS
DEVELOPMENT/ OPPORTUNISTIC A combination of falling debt costs and a moderation of construction costs will create pockets of opportunity where project feasibilities can be supported. Notwithstanding this, current land values mean economic rents in excess of $250/sqm are required in markets such as Western Sydney, making development feasibilities challenging. RECOMMENDATIONS There is a window of opportunity in several markets, including Outer Western Sydney and Melbourne’s West, to capitalise on a period of planning and or servicing uncertainty. There exists many tenants unable to meet expansion plans due to these constraints, yet owners of sites who can compete in the current development cycle can leverage this demand via a pre commitment, thereby de-risking the site.
Core plus strategies have been the dominant play in recent years as groups look to extract alpha, and this is expected to remain the case in 2025. The main focus of this strategy stems from the ability to capture positive rent reversion, and while a large share of this growth has been captured at market review dates, an analysis of REIT re-leasing spreads shows that many assets remain under rented, some as high as 50%. While core plus assets may present some operational or leasing risks, these issues can be mitigated through active management strategies. RECOMMENDATIONS Target land-constrained markets where the delivery of supply is challenging, which will not only support the initial rental uplift from growth already recorded but also future rental outperformance.
LOGISTICS & INDUSTRIAL OUTLOOK 2025
2025 OUTLOOK TIMELINE
Unemployment rate moves towards 4.5%
CRE credit starts to haw and flow
t
Book Values Stabilise Supply pipeline thins given capital constraints and construction costs
Q1 2025
Q2 2025
Macroeconomic/Financial Indicator
CRE Debt Markets Indicator
CRE Fundamentals Indicator
CRE Capital Markets Indicator
Source: Cushman & Wakefield Research
CUSHMAN & WAKEFIELD | 9
Business confidence improves
Economic growth improves due to easing consumer headwinds
Decision making timeline normalises
Core inflation improves towards 3%
Consumer confidence improves
Capital markets transactions momentum continues
RBA pivots and starts rate cutting cycle
10Y bonds fall to ~4.0%
L&I yield compression cycle begins
Q3 2025
Q4 2025
Q1 2026
LOGISTICS & INDUSTRIAL OUTLOOK 2025
CUSHMAN & WAKEFIELD | 11
KEY TRENDS
LOGISTICS & INDUSTRIAL OUTLOOK 2025
CUSHMAN & WAKEFIELD | 13
2024 SNAPSHOT
PERTH 2024 Investment Volumes
NATIONAL
$192.0 million
Q4 2024 Prime Core Market Yield 6.50% 2024 Gross Take-up
2024 INVESTMENT VOLUMES $7.2 billion
297,769 sqm
Q4 2024 Vacancy Rate
2.7%
ADELAIDE 2024 Investment Volumes
Q4 2024 PRIME CORE MARKET YIELD 5.85%
$174.5 million
Q4 2024 Prime Core Market Yield 6.50% 2024 Gross Take-up
143,724 sqm
Q4 2024 Vacancy Rate
2.1%
2024 GROSS TAKE-UP (SQM) 3,171,941 Q4 2024 VACANCY RATE 2.5%
MELBOURNE 2024 Investment Volumes $3.1 billion Q4 2024 Prime Core Market Yield 5.60% 2024 Gross Take-up 1,066,471 sqm Q4 2024 Vacancy Rate 2.2%
BRISBANE 2024 Investment Volumes
$1.4 billion
Q4 2024 Prime Core Market Yield 6.10% 2024 Gross Take-up
618,467 sqm
Q4 2024 Vacancy Rate
3.1%
SYDNEY 2024 Investment Volumes
Brisbane
$2.3 billion
Adelaide
Q4 2024 Prime Core Market Yield 5.45% 2024 Gross Take-up
Perth
Sydney
1,045,511 sqm
Melbourne
Q4 2024 Vacancy Rate
2.5%
Source: Cushman & Wakefield Research
LOGISTICS & INDUSTRIAL OUTLOOK 2025
2024 KEY LEARNINGS 2024 KEY LEARNINGS
Investment volumes reach $7.2 billion
Melbourne was the most active city
Investment volumes in 2024 increased by over 40% year-on-year. Excluding the record level of activity recorded in 2021, 2024 volumes were 30% above the 10 year average. ! Assets remain tightly held as obtaining scale remains challenging : Despite the pick-up in investment activity, total volumes amounted to just 2.0% of the sector’s investable universe. Portfolio transactions amounted to just under $2.2 billion for the year. ! Buyer depth and participation gathers momentum : Momentum from capital gathered pace throughout the year, stemming from greater pricing conviction. Buyer participation was strongest for core plus opportunities where positive rental reversions can be realised in the short term, yet there were clear signs of support for core strategies. ! Recapitalisaitons remain a theme: With a reluctance to trade assets outright, partial interests continued to be brought to market. With the bid-ask spread largely on par, more success was achieved in these campaigns compared to 2023, with just over $1.3 billion of recapitalisations trading in 2024, headlined by the Peregrine Portfolio. ! Melbourne was the most active city: Despite challenges posed by the doubling of the Absentee Owner Surcharge, Melbourne was the most active city for investment in 2024, accounting for 44% of total volumes nationally ($3.1 billion). However, 71% of Melbourne asset sales were to domestic buyers (by capital source), compared to 43% for Sydney and 25% in Brisbane. Further, two transactions accounted for over $1.2 billion of Melbourne’s investment activity. ! Domestic investment led by superannuation funds: Australian superannuation funds acquired just over $1.5 billion in 2024, representing 40% of domestic acquisitions. Domestic-based private investors accounted for 25% of domestic acquisitions, with a trend being these investors participating in price brackets historically dominated by institutional groups. ! US and Japan were the dominant sources of oshore capital: Capital out of the US accounted for 22% of trades by value in 2024 and includes acquisitions from TPG Angelo Gordon, Blackstone and Goldman Sachs. Similarly, capital from Japan into logistics was the strongest on record, with almost $500 million flowing into the sector, led by Hankyu Hanshin Properties. Assets remain tightly held as obtaining scale remains challenging Despite the pick-up in investment activity, total volumes measured just 2.0% of the sector’s investable universe. Portfolio transactions amounted to just under $2.2 billion for the year. Buyer depth and participation gathers momentum Momentum from capital gathered pace throughout the year, stemming from greater pricing conviction. Buyer participation was strongest for core plus opportunities where positive rental reversions could be realised in the short term, yet there were clear signs of support for core strategies. Recapitalisaitons remain a theme With a reluctance to trade assets outright, partial interests continued to be brought to market. With the bid-ask spread largely on par, more success was achieved in these campaigns compared to 2023, with just over $1.3 billion of recapitalisations trading in 2024, headlined by the Peregrine Portfolio. Cushman & Wakefield Despite challenges posed by the doubling of the Absentee Owner Surcharge, Melbourne was the most active city for investment in 2024, accounting for 43% of total volumes nationally ($3.1 billion). However, 71% of Melbourne asset sales were to domestic buyers (by capital source), compared to 43% for Sydney and 25% in Brisbane. Further, two transactions accounted for over $1.2 billion of Melbourne’s investment activity. Domestic investment led by superannuation funds Australian superannuation funds acquired just over $1.5 billion in 2024, representing 40% of domestic acquisitions. Domestic-based private investors accounted for 25% of domestic acquisitions, with a trend being these investors participating in price brackets historically dominated by institutional groups. US and Japan were the dominant sources of offshore capital Capital out of the US accounted for 24% of trades by value in 2024 and includes acquisitions from TPG Angelo Gordon, Blackstone and Goldman Sachs. Similarly, capital from Japan into logistics was the strongest on record, with almost $500 million flowing into the sector, led by Hankyu Hanshin Properties (excludes land acquisitions). N ! Investment volumes reach $7.0 billion: Investment volumes in 2024 increased by 39% year on-year. Excluding the record level of activity recorded in 2021, 2024 volumes were 27% above the 10-year average. $ $ $
$ $ $ $ $1 $
$
CUSHMAN & WAKEFIELD | 15
39% year- % above the
National Logistics & Industrial Investment Volumes (>$10 million) - $bn
National Logistics & Industrial Investment Volumes (>$10 million) - $bn
$10 $12 $14 $16 $18
14 16 18
pick-up in
verse.
$0 $2 $4 $6 $8 10 $12
hered pace as strongest t term, yet
$0 $2 $4 $6 $8
al interests ess was sations
2021
2017
2019
2018
2015
2016
2014
2022
2023
2024
2020
Sydney Melbourne Brisbane Perth Adelaide
2021
2017
2019
2018
2015
2016
2014
2022
2023
2024
2020
2024 Investment Volumes Share by State 2024 Investment Volumes Share by State Sydney Melbourne Brisbane Perth Adelaide
the
4, ne asset 5% in stment
2%
2024 Investment Volumes Share by State
3%
2%
3%
20%
32%
unds mestic-based investors
Sydney Melbourne Brisbane Perth Adelaide
20%
32%
Sydney Melbourne Brisbane Perth Adelaide
e US elo Gordon, ongest on rties.
43%
43%
Source: Cushman & Wakefield Research
LOGISTICS & INDUSTRIAL OUTLOOK 2025
2024 IN CHARTS
2024 IN CHARTS
Despite the improvement in transaction activity, investment volumes in 2024 only amounted to around 2.0% of the L&I sector’s total investable universe Share of Transaction Volumes Compared to Investable Universe Despite the improvement in transaction activity, investment volumes in 2024 only amounted to around 2.0% of the sector’s total investable universe. 2024 IN CHARTS Share of Transaction Volumes Compared to Investable Universe Despite the improvement in transaction activity, investment volumes in 2024 only amounted to around 2.0% of the sector’s total investable universe. Share of Transaction Volumes as a share of L&I Investable Universe
Natio Infill from Natio Infill from 2023 2024
0% 1% 2% 3% 4% 5% 6% 7%
2022 2024
2021
2023
2020 2022
0
2021
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
2020
Offshore investors buying direct were the most active in 2024; while REITs were the most active vendors for the year 2024 Purchaser & Vendor Profile ($bn) O shore investors buying direct were the most active in 2024; while REITs were the most active vendors for the year. O shore investors buying direct were the most active in 2024; while REITs were the most active vendors for the year. $2.0
Almo $100 0
$2.0 $2.5 $3.0 $3.5 $4.0 2024 Almo $100 2024
2024 Purchaser & Vendor Profile ($bn)
$1.0
2024 Purchaser & Vendor Profile ($bn)
$0.0
$2.0
$1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0
$0.0 $0.5 $1.0 $1.5
-$2.0 $0.0 -$1.0 $1.0
-$3.0
-$1.0
Oshore Direct
Unlisted Fund Super Fund Private
REIT
Corporate
-$2.0
Note, p $0.0 $0.5
Buyer Vendor
-$3.0
Cushman & Wakefield Oshore Direct
Unlisted Fund Super Fund Private
REIT
Corporate
Source: Cushman & Wakefield Research
Buyer Vendor
Note, p
Cushman & Wakefield
Source: Cushman & Wakefield Research
CUSHMAN & WAKEFIELD | 17
Infill transactions accounted for 47% of investment volumes for the year, down from 62% in 2023. However, this remains above the 39% recorded in 2020 National Infill vs Non-Infill Transactions (by Volume) Infill transactions accounted for 48% of investment volumes for the year, down from 62% in 2023. However, this remains above the 39% recorded in 2020. National Infill vs Non-Infill Transactions (by Volume) Infill transactions accounted for 48% of investment volumes for the year, down from 62% in 2023. However, this remains above the 39% recorded in 2020. National Infill vs Non-Infill Transactions (by Volume) 2024
024
24
2023
2024
2022
2021 2023 2022
2020
2021
0%
20%
40%
60%
80%
100%
2020
Infill
Non-Infill
s were
Almost 55% of investment volumes in 2024 stemmed from transactions above $100 million, yet they only represented 11% of total transactions Almost 55% of investment volumes in 2024 stemmed from transactions above $100 million, yet they only represented 11% of total transactions. 2024 Transactions by Size Bracket Almost 55% of investment volumes in 2024 stemmed from transactions above $100 million, yet they only represented 11% of total transactions. 2024 Transactions by Size Bracket 0% 20% 40% 60% 80% Infill Non-Infill 2024 Transactions by Size Bracket
100%
were
50
$0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0
40
30
50
$0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0
20
40
10
30
0
20
$10m-$20m $20m-$30m $30m-$50m $50m-$100m >$100m
orate
10
No. of Transations (RHS)
Volume ($bn)
0
Note, portfolio and recapitalisation transactions have been treated as one
$10m-$20m $20m-$30m $30m-$50m $50m-$100m >$100m
rate
AUSTRALIA L&I OUTLOOK 2025 2
Volume ($bn)
No. of Transations (RHS)
Note, portfolio and recapitalisation transactions have been treated as one
AUSTRALIA L&I OUTLOOK 2025 2
Source: Cushman & Wakefield Research Note, portfolio and recapitalisation transactions have been treated as one
LOGISTICS & INDUSTRIAL OUTLOOK 2025
WHERE DID THE CAPITAL ORIGINATE FROM?
HERE DID THE CAPITAL IGINATE FROM?
2024 Capital Purchaser Profile
Germany $0.2 billion
Switzerland $0.1 billion
Canada $0.2 billion
USA $1.7 billion
Source: Cushman & Wakefield Research
Rounded to one decimal point
Note, data has been split out by the underlying capital source
& Wakefield
Source: Cushman & Wakefield Research Rounded to one decimal point Note, data has been split out by the underlying capital source
CUSHMAN & WAKEFIELD | 19
AUSTRALIA SCREENS ATTRACTIVELY FOR GLOBAL CAPITAL, GIVEN SOLID BASELINE FUNDAMENTALS.
China $0.1 billion
Japan $0.5 billion
Offshore capital sources became increasingly varied in 2024, headlined by several new market entrants into the Australian L&I sector, led by capital out of Japan. In many cases, acquisitions made by domestic managers/fund managers (GP) are backed by offshore capital sources (LP). For the purpose of the following map, we have split out the underlying capital source. Outside of domestic capital in 2024, which was underpinned by super funds, the US represented the most dominant source of capital in the Australian L&I market. Notably, this includes acquisitions from or on behalf of Blackstone, Goldman Sachs, PGIM and EQT Exeter.
Taiwan $0.2 billion
Hong Kong $0.1 billion
Malaysia $0.5 billion
Singapore $0.5 billion
Australia $3.1 billion
AUSTRALIA L&I OUTLOOK 2025 10
LOGISTICS & INDUSTRIAL OUTLOOK 2025
GLOBAL OUTBOUND CAPITAL FLOWS Globally, there was almost $215 billion (AUD) deployed into L&I assets in 2024 (excluding data centres), representing a 3% increase from 2023. By market, the US was the most active by a significant margin, representing 46% of global investment volumes ($97.3 billion), followed by the UK ($17.0 billion) and South Korea ($12.6 billion). Cross-border deployment (acquisitions made by offshore capital sources) accounted for approximately 60% of total L&I investment volumes globally for the year, with capital from the US deploying $28.4 billion, followed by the UK ($7.9 billion) and Canada ($7.4 billion).
CUSHMAN & WAKEFIELD | 21
2024 Top So
Globally, there was almost $215 billion (AUD) deployed into L&I assets in 2024 (excluding data centres), representing a 3% increase from 2023. By market, the US was the most active by a significant margin, representing 46% of global investment volumes ($97.3 billion), followed by the UK ($17.0 billion) and South Korea ($12.6 billion). Cross-border deployment (acquisitions made by oshore capital sources) accounted for approximately 60% of total L&I investment volumes globally for the year, with capital from the US deploying $28.4 billion, followed by the UK ($7.9 billion) and Canada ($7.4 billion).
US - $28.4 bn
Top 10 Sources of Capital for L&I Top 10 Sources of Capital for L&I
US
UK
UK – $7.9 bn
Canada
Singapore
Sweden
Canada – $7.4
UAE
Spain
Belgium
Singapore - $4
Hong Kong
China
Sweden – $4.0
$0
$10
$20
$30
Billions
2024 2023
Source: MSCI, Cushman & Wakefield Research
2024 Top Sources of Capital for L&I Globally – Key Investors & Markets Cushman & Wakefield
KEY MARKETS FOR DEPLOYMENT (2024)
MARKET
KEY INVESTORS
UK Australia India France Germany
US $28.4 BN
US France Germany Netherlands Italy
UK $7.9 BN
US Germany France Italy Spain
CANADA $7.4 BN
US Germany Japan South Korea Indonesia Norway Denmark Belgium Netherlands Germany
SINGAPORE $4.8 BN
SWEDEN $4.0 BN
Source: MSCI, Cushman & Wakefield Research
LOGISTICS & INDUSTRIAL OUTLOOK 2025
CUSHMAN & WAKEFIELD | 23
AUSTRALIA IN A GLOBAL CONTEXT
LOGISTICS & INDUSTRIAL OUTLOOK 2025
AUSTRALIA’S LEADING ECONOMIC FUNDAMENTALS AUSTRALIA’S LEADING ECONOMIC FUNDAMENTALS AUSTRALIA’S LEADING ECONOMIC FUNDAMENTALS Australia has been one of the best performing economies over the past 30-years with this outperformance forecast to remain Australia has been one of the best performing economies over the past 30 years with this outperformance forecast to remain. Australia has been one of the best performing economies over the past 30 years with this outperformance forecast to remain. GDP Growth Forecast (Total Growth 2024 – 2034)
Popula Popula marke Populatio markets o
-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
Australia United States South Korea Australia United States Canada South Korea France G12 Average United Kingdom Spain Netherlands Germany Italy Japan Canada France Spain United Kingdom Netherlands Italy Germany Japan
6%
Populatio
GDP Growth Forecast (2024 – 2034)
10% 10%
-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
6.0%
11%
10.0% 10.0%
14% 14%
11.0%
14.0% 14.0%
15%
18% 18%
15.0% 14.9%
21%
- 2014-2024 Population Growth
18.0% 18.0%
27%
21.0%
0%
5%
10%
15%
20% 25% 30%
-10.0% 2014-2024 Population Growth
26.7%
Australia has the 5th most valuable pension system globally, currently valued at over US $2.4 trillion, equivalent to 145% of GDP Top Global Pension Markets by Asset Value (USD billions - 2023) Australia has the 5th most valuable pension system globally, currently valued at over US $2.4 trillion, equivalent to 145% of GDP. Australia has the 5th most valuable pension system globally, currently valued at over US $2.4 trillion, equivalent to 145% of GDP. 0% 5% 10% 15% 20% 25% 30%
High and w Medi $50,0 $100,0 $150,0 $200,0 $250,0 $300,0 $350,0 $400,0
High we and war
Top Global Pension Markets by Asset Value (USD billions - 2023) Top Global Pension Markets by Asset Value (USD billions) Market
Median W
Size of Market (USD trillion) $35,600 Size of Market (USD trillion)
$250,000
US Market
Japan
$3,385 $3,206 $3,105 $2,448 $1,737
$200,000
US
$35,600 $3,385 $3,206 $3,105 $2,448 $1,737
UK Japan
$150,000
Canada
UK
Australia
$100,000
Canada
Netherlands Switzerland South Korea
Australia
$50,000
$1,361 $1,102 $596 $423
Germany South Korea Netherlands Switzerland
$0
$1,361 $1,102 $596 $423
Lux
China Germany
Cushman & Wakefield
Belg
China
Cushman & Wakefield
Source: Oxford Economics, Thinking Ahead Institute, UBS, Cushman & Wakefield Resear
Source: Oxford Economics, Thinking Ahead Institute, UBS, Cushman & Wakefield Research
Source: Oxford Economics, Thinking Ahead Institute, UBS, Cushman & Wakefield Research
CUSHMAN & WAKEFIELD | 25
Population growth in Australia is forecast to outpace other comparable markets over the next decade, underpinning warehouse demand Population growth in Australia is forecast to outpace other comparable markets over the next decade, underpinning warehouse demand. Population growth in Australia is forecast to outpace other comparable markets over the next decade, underpinning warehouse demand. Population Growth, Historical & Forecast Population Growth, Historical & Forecast
past 30
30
Australia
-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
Population Growth, Historical & Forecast
Canada
Australia
-4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
Canada
United States
United Kingdom
Germany
Singapore United Kingdom
United States
South Korea
Netherlands
Germany
France
Singapore
Japan South Korea
Italy
Netherlands
France
2014-2024 Population Growth
26.7%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
30%
Italy
Japan
2024 – 2034 Population Growth
2014-2024 Population Growth
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
tly valued
High wealth levels in Australia provide support to consumer consumption and warehouse demand. High wealth levels in Australia provide support to consumer consumption and warehouse demand. Median Wealth per Adult (2022 – USD) High wealth levels in Australia provide support to consumer consumption and warehouse demand. 2024 – 2034 Population Growth
30%
alued
$250,000
lion)
Median Wealth per Adult (2023 – USD) Median Wealth per Adult (2023 – USD) $200,000
$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000
$150,000
$100,000
$50,000
$0
US
UK Norway
Italy
Spain
Qatar
Korea
Japan
Ireland
France Netherlands
Taiwan
Canada
Belgium
Australia
Denmark
Singapore
Hong Kong
Switzerland
New Zealand
AUSTRALIA L&I OUTLOOK 2025 13
ute, UBS, Cushman & Wakefield Research
UK
Italy
Malta
Spain
Japan
Korea
France Netherlands
Taiwan
Canada
Norway
Belgium
Australia
Denmark
Singapore
Hong Kong
Switzerland
Luxembourg
New Zealand
United States
Source: Oxford Economics, Thinking Ahead Institute, UBS, Cushman & Wakefield Research
Wakefield Research
LOGISTICS & INDUSTRIAL OUTLOOK 2025
OCCUPIER FUNDAMENTALS COMPARE FAVOURABLY Globally, vacancy rates have risen over the past two years as elevated levels of supply coincided with a normalisation of occupier demand. As a result, many major markets have vacancy rates now at or in excess of 7.0%, which has resulted in a slowdown in rental growth. For Australia, the make-up of supply has been dierent in that commitment levels on completion have been well above many other markets, which has capped the upswing in vacancy rates. OCCUPIER FUNDAMENTALS COMPARE FAVOURABLY
Despite th with a nati rental grow potential t
Q4 2024 Vacancy Rates by Market Q4 2024 Vacancy Rates by Market
2024 Prim
10.0%
9.7%
9.0%
8.6%
8.0%
8.3%
8.0%
7.6% 7.6%
7.0%
6.0%
5.9%
5.5%
5.0%
5.1%
4.7%
4.0%
3.0%
3.1%
2.8%
2.5%
2.0%
2.2% 2.2%
1.0%
0.0%
Perth
Dallas
Tokyo
Sydney
London
Chicago
Brisbane
Adelaide
New York
Singapore
Melbourne
Hong Kong
New Jersey
German Hubs
Inland Empire
Cushman & Wakefield
Source: Cushman & Wakefield Research
Globally, vacancy rates have risen over the past two years as elevated levels of supply coincided with a normalisation of occupier demand. As a result, many major markets have vacancy rates now at or in excess of 7.0%, which has resulted in a slowdown in rental growth. For Australia, the make-up of supply has been different in that commitment levels on completion have been well above many other markets, which has capped the upswing in vacancy rates.
Source: Cushman & Wakefield Research
CUSHMAN & WAKEFIELD | 27
Despite the increase in vacancy levels in Australia, it still ranks as the tightest market globally with a national vacancy rate of just 2.5%. This has continued to result in the outperformance of rental growth compared to global peers. Lower levels of forecast supply in 2025 have the potential to underpin further outperformance.
coincided ncy rates tralia, the been well
2024 Prime Rental Growth by Market 2024 Prime Rental Growth by Market
12.0%
9.7%
11.5%
9.0%
.6%
8.4% 8.7%
6.0%
4.7% 5.0% 5.4%
3.0%
3.8% 3.9%
3.3% 3.7%
1.3% 1.4% 1.7% 1.7%
0.0%
-3.0%
-6.0%
-9.0%
-12.0%
-14.0%
-15.0%
kyo
UK
Dallas
Perth
Dallas
Tokyo
Sydney
Chicago
Brisbane
Adelaide
New York
Singapore
Melbourne
Hong Kong
New Jersey
German Hubs
Inland Empire
AUSTRALIA L&I OUTLOOK 2025 14
Despite the increase in vacancy levels in Australia, it still ranks as the tightest market globally with a national vacancy rate of just 2.5%. This has continued to result in the outperformance of rental growth compared to global peers. Lower levels of forecast supply in 2025 have the potential to underpin further outperformance.
LOGISTICS & INDUSTRIAL OUTLOOK 2025
GLOBAL PRICING
Q4 2024 Prime L&I Yield and Current Interest Rate by Market
Rotterdam PY: 5.00% | IR: 3.15%
London PY: 4.75% | IR: 4.75%
Inland Empire PY: 4.90% | IR: 4.50%
Paris PY: 4.90% | IR: 3.15%
New York PY: 4.85% | IR: 4.50%
Source: Cushman & Wakefield Research PY: Prime Yield IR: Country Interest Rate
CUSHMAN & WAKEFIELD | 29
Seoul PY: 5.85% | IR: 3.00%
German Hubs PY: 4.85% | IR: 3.15%
Beijing PY: 6.00% | IR: 3.10%
Tokyo PY: 4.20% | IR: 0.50%
Hong Kong PY: 3.80% | IR: 4.75%
Singapore PY: 5.75% | IR: 3.00%
Sydney PY: 5.45% | IR: 4.10% Brisbane PY: 6.10% | IR: 4.10%
Adelaide PY: 6.50% | IR: 4.10% Perth
PY: 6.50% | IR: 4.10%
Melbourne PY: 5.60% | IR: 4.10%
LOGISTICS & INDUSTRIAL OUTLOOK 2025
AUSTRALIA RANKS HIGHLY FOR GLOBAL CAPITAL DEPLOYMENT IN 2025
Global allocations to Australian real estate continues to increase as investors subscribe to the resilient outlook and relative outperformance of Australia’s core real estate sectors. As per the 2025 ANREV Investment Intentions Survey, Australia is the most sought after market in APAC for capital deployment with Sydney and Melbourne taking out the top two spots, while the remaining Australian capital cities rank fifth.
HIGHLY FOR PLOYMENT IN 2025 IGHLY FOR PLOYMENT IN 2025
rease as performance of ease as erformance of
Preferred APAC City for Capital Deployment in 2025 Preferred APAC City for Capital Deployment in 2025 Preferred APAC City for Capital Deployment in 2025
20% 30% 40% 50% 60% 70% 80% 90% 100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10%
tralia is the with Sydney aining alia is the ith Sydney ining
91%
91%
83%
78%
83%
78%
70%
70%
52% 48% 52% 48%
39% 35% 39% 35%
13%
13%
Seoul
Tokyo
Osaka
Sydney
Seoul
Tokyo
Osaka
Sydney
Singapore
Melbourne
Singapore
Melbourne
China Tier 1 cities China Tier 1 cities
Other Aust. Cities Other Aust. Cities
Other Japan Cities Other Japan Cities
Preferred APAC City/Sector Combination for Capital Deployment 2025 Preferred APAC City/Sector Combination for Capital Deployment 2025 Preferred APAC City/Sector Combination for Capital Deployment 2025
0% 10% 20% 30% 40% 50% 60% 70% 80%
0% 10% 20% 30% 40% 50% 60% 70% 80%
70% 70% 70% 70% 70% 70%
65%
61%
65%
57%
61%
52% 48% 48% 52% 48% 48%
57%
39%
39%
Osaka Oce Osaka Oce
Tokyo Oce Tokyo Oce
Osaka Logistics Osaka Logistics
Tokyo Logisitcs Tokyo Logisitcs
Sydney Logistics Sydney Logistics
Osaka Residential Osaka Residential
Tokyo Residential Tokyo Residential
Sydney Residential Sydney Residential
Melbourne Logistics Melbourne Logistics
Melbourne Residential Melbourne Residential
Source: ANREV 2025 Investment Intentions Survey
CUSHMAN & WAKEFIELD | 31
#1 SYDNEY
#2 MELBOURNE
TOP 5 APAC INVESTMENT DESTINATIONS FOR 2025
#3 TOKYO
#5 OTHER AUSTRALIAN CITIES
#4 OSAKA
LOGISTICS & INDUSTRIAL OUTLOOK 2025
CUSHMAN & WAKEFIELD | 33
2025 OUTLOOK
LOGISTICS & INDUSTRIAL OUTLOOK 2025
2025 L&I CAPITAL MARKETS SURVEY
To understand client challenges and their outlook for 2025, we undertook an Australian L&I Capital Markets survey in late 2024. The sample size covered over 150 investors across a broad geography base and investor spectrum.
WHAT ARE THE INVESTORS INTENTIONS FOR 2025?
01 SYDNEY REMAINS THE NUMBER ONE CITY FOR INVESTMENT The doubling of the Absentee Owner Surcharge in Victoria has turbocharged Sydney’s status as the preferred city for investment. 71% of investors stated Sydney as their preferred
02 CAPITAL TO BECOME MORE ACTIVE IN 2025 Investors are planning to be much more active in 2025, with 97% stating they plan to deploy capital in the year. This compares to 86% in our 2024 survey.
03 STOCK TO REMAIN TIGHTLY HELD Just 38% of investors are planning to divest an asset in 2025. This environment will mean scale will remain challenging to obtain while it will continue to create an imbalance in demand and availability, particularly in Sydney. The lack of suitable stock to acquire was also the top reason prohibiting investors from deploying capital immediately.
Close to 60% plan to make their first
city for investment. Brisbane now ranks
investment in Q1 2025, with offshore investors planning to be the most active.
above Melbourne, while a large share of offshore
groups have either put future Victorian
investments on hold or are planning to divest select assets in 2025. This will however create opportunities for local domiciled capital.
CUSHMAN & WAKEFIELD | 35
04 CORE PLUS AND VALUE ADD
05 A NEW CYCLE HAS BEGUN AS THE SECTOR ENTERS A YIELD COMPRESSION CYCLE In line with the view
06 THE SECTOR FACES FEWER HEADWINDS FOR DEPLOYMENT IN 2025 Unlike the 2024 Outlook survey, this year’s survey highlighted fewer immediate barriers to entry within the sector. 37% of investors flagged no immediate barriers to entry (compared to 22% in the 2024 Outlook survey), while 25% noted the mismatch in buyer and vendor pricing expectations remains a challenge (down from 40% in the 2024 Outlook survey).
STRATEGIES REMAIN ON THE MENU, YET CORE IS BACK Given prospects for further rental growth in 2025, investors are planning to remain active for core plus product, with 53% stating they are the 2024 survey, with a more pronounced shift to investor appetite for core. 58% of investors flagged they are very interested in core strategies, up from 50% in the 2024 survey. very interested. Interestingly, this compares to 63% in
that debt costs will be reduced in 2025, 72% of investors expect yield compression by the end of the year. Offshore investors were more aggressive in their outlook for yields, with over 90% expecting yield compression in 2025, led by capital from Singapore and Japan.
LOGISTICS & INDUSTRIAL OUTLOOK 2025
CUSHMAN & WAKEFIELD | 37
2025 L&I CAPITAL MARKETS SURVEY 2025 L&I CAPITAL MARKETS SURVEY Survey Charts Preferred L&I Investment Locations for 2025
2025 Prefe 2025 Preferre
Preferred L&I Investment Locations for 2025
20% 30% 40% 50% 60% 70% 80%
Developmen
Development
Value Ad
Value Add
Core Plu
Core Plus
Core
Cor
0
0% 10%
Very inter Very interest
Brisbane Brisbane
Melbourne
Perth
Adelaide
Sydney
Melbourne
Perth
Adelaide
Note: Based on top 3 responses Note: Based on top 3 responses
2025 Capital Deployment Intentions 2025 Capital Deployment Intentions 2025 Capital Deployment Intentions
2025 Prici 2025 Pricing
Developer High Net Worth Individual/Family Oce Other Private Equity REIT Sovereign Wealth Fund Super Fund Syndicate Unlisted Fund Developer High Net Worth Individual/Family Oce Other Private Equity REIT Sovereign Wealth Fund Super Fund Syndicate Unlisted Fund
97%
97%
67%
67%
100%
100%
25-50 25-50 bas
88%
88%
100% 100%
100% 100%
25-50 ba 25-50 basis
67%
67% 57%
0-25 0-25 bas
57%
100%
100%
0-25 ba 0-25 basis
0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%
No intentions to buy Unsure at this stage Intend to buy No intentions to buy Unsure at this stage Intend to buy
2025 Preferred Risk Profiles Cushman & Wakefield Cushman & Wakefield 2025 Preferred Risk Profiles
Source: Cushman & Wakefield Research Source: Cushman & Wakefield Research
Development
18%
17%
26%
Value Add
39%
25%
24%
Core Plus
53%
36%
9%
Core
58%
14%
13%
0%
20%
40%
60%
80%
100%
Very interested Somewhat interested Neutral
Not very interested Not interested at all
delaide
Source: Cushman & Wakefield Research
2025 Pricing Outlook
Remain the same
17%
LOGISTICS & INDUSTRIAL OUTLOOK 2025
Timin
2025 Preferred Risk Profiles
Development
18%
17%
26%
Value Add
39%
25%
24%
Core Plus
53%
36%
9%
58% 2025 L&I CAPITAL MARKETS SURVEY 0% 20% 40% Core
14%
13%
60%
80%
100%
Very interested Somewhat interested Neutral
Not very interested Not interested at all
aide
Survey Charts Timing of Capital Deployment
2025 Pricing Outlook 2025 Pricing Outlook
2025 Di
Remain the same
17%
3%
25-50 basis point expansion
4%
25-50 basis point compression
15%
Q1 2025 Q2 2025
40%
0-25 basis point expansion
8%
Q3 2025 Q4 2025
57%
High Net
0-25 basis point compression
57%
100%
0% 10% 20% 30% 40% 50% 60%
AUSTRALIA L&I OUTLOOK 2025 19
Immediate Barriers to Entry
Victori
Immediate Barriers to Entry
R adjustm
Cap rate uncertainty
3%
Access to capital
3%
F
Cost of debt
7%
Mismatch in pricing expectations
25%
Lack of suitable stock
25%
Nothing - actively looking
37%
0%
10%
20%
30%
40%
Cushman & Wakefield
Source: Cushman & Wakefield Research
Source: Cushman & Wakefield Research
2025 L&I CAPITAL MARKETS SURVEY
CUSHMAN & WAKEFIELD | 39
ng of Capital Deployment
Survey Charts Timing of Capital Deployment
Timing of Capital Deployment
2025 L&I CAPITAL MARKETS SURVEY
3%
Q1 2025 Q2 20
Survey Charts Timing of Capital Deployment
40%
Q3 2025 Q4 20
57%
2025 Div
3%
Immediate Barriers to Entry
Q1 2025 Q2 2025
40%
Q3 2025 Q4 2025
57%
Cap rate uncertainty
3%
High Net W
Access to capital
3%
2025 Divestment Intentions 2025 Divestment Intentions 2025 Divestment Intentions Developer High Net Worth Individual/Family O ce Other Private Equity REIT Sovereign Wealth Fund Super Fund Syndicate Unlisted Fund Developer High Net Worth Individual/Family Oce Other Private Equity REIT Sovereign Wealth Fund Super Fund Syndicate Unlisted Fund
Cost of debt
7%
Mismatch in pricing expectations
25%
67%
28%
Immediate Barriers to Entry
25% Victoria
Lack of suitable stock
33%
33%
67%
28%
50%
Nothing - actively looking
33%
33%
Rema adjustme
50%
38%
Cap rate uncertainty
3%
50%
57% 0%
10%
20%
30
43%
50%
38%
Access to capital
3%
52%
44% 44%
Futu
43%
57%
Cushman & Wakefield
Source: Cushman & Wakefield Research
22%
Cost of debt
7%
52%
44% 44%
57%
29%
22%
Mismatch in pricing expectations
25%
25%
75%
57%
29%
Divesting/
Lack of suitable stock
25%
25% 0% 20% 40% 60% 80% 100% 75%
Unsure at this stage No plans for divestments Nothing - actively looking
37%
0% 20% 40% 60% 80% 100% Planning to divest
0%
10%
Planning to divest 20%
30%
40%
Unsure at this stage No plans for divestments
Victorian Tax Impacts Victorian Tax Impacts Victorian Tax Impacts
Cushman & Wakefield
Source: Cushman & Wakefield Research
Remain active yet are making pricing adjustments or below the line adjustments Future Victorian investments on hold Remain active yet are making pricing adjustments or below the line adjustments
&$"
35%
$%"
Future Victorian investments on hold
50%
#"
Actively trying to buy
Actively trying to buy
7%
Divesting/planning to divest some Victorian assets Divesting/planning to divest some Victorian assets
!"
8%
37%
%"
'%"
(%"
&%" )%"
$%"
*%"
37%
40%
0% 10% 20% 30% 40% 50% 60%
40%
AUSTRALIA L&I OUTLOOK 2025 20
AUSTRALIA L&I OUTLOOK 2025 20
LOGISTICS & INDUSTRIAL OUTLOOK 2025
2025 OCCUPIER MARKET OUTLOOK
Occupier market fundamentals remain solid for the year ahead as high commitment levels and paused speculative developments place a cap on vacancy rates. Leasing demand is expected to remain patchy in the first half of 2025 before a more meaningful improvement in the second half of the year, in line with stronger economic growth. Similarly, with an upcoming Federal election in either April or May, consumers will remain cautious as they have in previous election years. Our 2025 forecasts for the occupier market can be summarised as:
DEMAND
VACANCY
The national vacancy rate is forecast to rise further over the next six months, averaging between 3.0%- 3.5% by mid-2025. However, easing supply in the second half of the year in several major submarkets, including Melbourne’s West, is expected to see the vacancy rate moderate thereafter.
National gross take-up is forecast to reach approximately 3.6 million sqm in 2025, aided by more pre-lease activity than was recorded in 2024 and a pick-up in demand from the transport and logistics sector.
SUPPLY
RENTAL GROWTH In our view, we believe there is scope for a higher rental growth outlook than the market may be assuming. Our base case is for prime rental growth of 4.5% in 2025, while a more subdued speculative supply pipeline will likely see a pull back in incentives
Supply will be much lower than earlier forecast as around one million sqm is delayed or paused. Nationally, approximately 2.5 million sqm is forecast to come online, with commitment levels of 45% already recorded. The pull-back in supply will result in supply shortages in several precincts throughout 2025.
in markets currently absorbing high levels of supply, including Melbourne’s West.
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