Logistics & Industrial Capital Markets 2024 Outlook Report

Welcome to Cushman & Wakefield’s 2024 Australian Logistics & Industrial (L&I) Capital Markets outlook report. This report will explore the key themes of 2023 and our outlook for the year ahead in light of the current macroeconomic environment.

2023 represented a year of transaction dormancy for commercial real estate, both globally and in Australia, as rising debt costs impacted pricing and, in the absence of a material adjustment to book values, resulted in a mismatch between buyer and vendor price expectations. However, the L&I sector proved more resilient than other mainstream commercial sectors, supported by record levels of income growth, which helped offset the continued expansion of capitalisation rates. As a result, the contraction in investment volumes compared to 2022 was less severe than other mainstream commercial sectors. Much of the sector’s strength lies within the occupier market, which remains heavily undersupplied as demand has far outpaced supply. With high levels of population growth forecast over the next decade and coupled with other structural tailwinds such as e-commerce, infrastructure investment and a continued rebalancing of supply chains, this undersupply is expected to persist.

Led by these thematics, the investment thesis for L&I remains solid, and both local and offshore capital sources are expected to continue to subscribe to the outlook for further growth in the sector. In addition, structural challenges in other sectors will underpin a further reweighting of capital to the sector, and new market entrants will continue to emerge, as was evident in 2023. Looking to 2024, the possibility of rate cuts in the second half of the year offers a substantial upside. A floor in pricing has largely been set, albeit book values still have some further unwinding to play out heading into mid-2024. Notwithstanding this, capital has returned, and investors who sat on the sidelines for much of 2023 have flagged their intention to re-enter the market in early 2024. Active buyers in the first half of 2024 will be able to exploit opportunities posed by the stabilisation of pricing before yield spreads to debt costs and bond yields improve in late 2024 and into 2025.

Luke Crawford Head of Logistics & Industrial Research – AUS Luke.Crawford@cushwake.com +61 421 985 784

Tony Iuliano International Director Head of Logistics & Industrial – ANZ Tony.Iuliano@cushwake.com +61 412 992 830

CAPITAL MARKETS 2024 OUTLOOK