Logistics & Industrial Capital Markets 2024 Outlook Report

Shift back to long WALE expected in 2024 Looking at 2024, short WALE assets that offer positive income reversion in infill markets are expected to remain aggressively sought. However, the re-activation of capital chasing core product is expected to shift in 2024, and a focus on quality long WALE assets is expected to re-emerge as investors reassess risk, with a greater focus on income security. The catalyst for this shift will stem from a reset of pricing through valuations, which will enable vendors to meet the market more appropriately. Portfolios to be the focus of new market entrants High barriers to scale exist in the Australian L&I market, and there have been just six portfolios

sold above $500 million in Australian history. Given this, portfolios will continue to be met with significant demand from groups looking to build scale quickly. In recent years, a premium was paid for portfolios, and our analysis suggests this was in the order of 50-85 basis points. While pricing premiums for scale were not evident in 2023, as most transactions were for sub $100 million individual assets, pricing premiums for portfolio opportunities are expected to re-emerge in 2024. Several significant offshore investors are looking to enter or expand their presence in the Australian market in 2024 and have flagged their intention to build scale quickly. This will allow them to immediately become a major player in the Australian market and have access to a diversified customer base across a broad geography base.

Figure 26. Portfolio vs Single Asset Market Yields

9.0%

8.0%

Single assets

7.0%

6.0%

5.0%

4.0%

Portfolios

3.0%

2.0%

Jan-19

Jul-19

Feb-20

Aug-20

Mar-21

Sep-21

Apr-22

Nov-22

May-23

Dec-23

Source: Cushman & Wakefield

29 | CUSHMAN & WAKEFIELD | LOGISTICS & INDUSTRIAL