Logistics & Industrial Capital Markets 2024 Outlook Report

Short WALE infill assets were highly sought

However, given the disconnect between buyer and vendor expectations, most of these processes did not trade. Processes that succeeded included a recapitalisation of Mirvac’s Switchyard Estate at Auburn, which Australian Retirement Trust bought for $177.3 million. Domestic unlisted funds, largely on behalf of offshore capital and privates were the most active Domestic unlisted funds were the dominant purchaser type in 2023, acquiring over $1.0 billion of assets for the year. However, in almost all cases, these acquisitions were backed by offshore capital sources and included but not limited to Gateway Capital with Cadillac Fairview, Centennial with Brookfield and Pittwater Industrial with Washington State Investment Board. Consistent with the post-GFC trend, private investors were the second most active buyers in 2023; however, 90% of assets bought (by number) by these privates were sub $40 million acquisitions. Notably, private investors were more passive in 2021 and 2022 as institutional groups were more aggressive on pricing, and the recent pick-up in private investor activity reflects tighter credit conditions and weaker participation from institutional groups in 2023, particularly AREITs.

Buyer participation was strongest for assets that offered immediate or short-term positive rental reversion. Given the level of rental growth, passing rents on select assets which traded were in excess of 30% below market rents. Alternatively, participation for core assets, particularly if access to market growth was unavailable beyond a three-year period, was more challenged. Regional capital continues to grow The long-term fundamentals of the Australian L&I sector are strong, and despite short-term volatility in economic conditions, investors are taking a five-plus-year view of the market and are planning to increase their allocations to the sector in 2024. We have identified $45 billion in capital seeking L&I assets in Australia, most of which are ready to deploy. Activation of this capital is expected in mid-2024 once yields stabilise and the bid-ask spread narrows. Multiple recapitalisations were offered to the market In 2023, there was well over $3.0 billion in recapitalisations offered to the market as capital sought liquidity and managers sought to keep funds under management.

Figure 12. Average Asset Size by State ($m)

$10.0 $15.0 $20.0 $25.0 $30.0 $35.0 $40.0 $45.0 $50.0

$0.0 $5.0

Sydney

Melbourne

Brisbane

Perth

Adelaide

Source: Cushman & Wakefield

13 | CUSHMAN & WAKEFIELD | LOGISTICS & INDUSTRIAL