Portfolio sales in Australia’s industrial real estate market have had a four-year sales streak, but the party can’t last forever.

JLL’s latest Australian Industrial Investment Review (AIIR) report shows nearly a third of the AU$6.89 billion in industrial property sales over 2016 were multi-asset transactions.

The AU$2.1 billion in portfolio sales were spearheaded by the sale of two Goodman portfolios which were sold to Blackstone. The portfolios included a total of 34 assets; a total value of AU$1.29 billion. Other notable portfolio sales of the year included JP Morgan’s six-asset sale to AMP for AU$250 million, and Growthpoint’s four-asset transaction with Mapletree for just over AU$142 million.

JLL research shows industrial portfolio transaction volumes have climbed by 155 percent on average per annum since 2013, reaching an all-time high in 2016.

“The sector’s gradual institutionalisation has gained impetus over the past four years,” says Michael Fenton, JLL’s Head of Industrial in Australia. “Vendors have recognised the ability to attract premium pricing by bundling assets together, as new entrants to the market require scale to establish a large enough platform and they are prepared to pay for it. In a market where the availability of stabilised income producing assets is diminishing, the opportunity for groups to access instant scale via a portfolio acquisition is very compelling.”

Increased offshore demand for Australian logistics assets has been a key driver for the increase in portfolio sales. The 2017 AIIR shows more than AU$2.9 billion in capital for industrial asset purchases in 2016 came from direct offshore investment.

“Foreign investors have contributed significantly to the spike in portfolios offered to the market for sale,” Fenton says. “In fact, the majority of major portfolio sales in 2016 – that is, those greater than AU$100 million – have been acquired by foreign investors.”

“First-time entrants to the market have all established a base here via a portfolio acquisition, including Ascendas, Mapletree, ARA, Blackstone and M&G, to name a few.”

Fenton points out scale has not been the sole driver of portfolio sales, with vendors also taking advantage of strong market fundamentals and groups exiting the logistics sector or the Australian market entirely.

“Groups to have done this successfully include GIC, Charter Hall, Goodman, Growthpoint, Altis and Equity Commonwealth,” he adds.

Going it alone

However, the portfolio sales bonanza is unlikely to continue in the short to medium term.

“There will be less portfolio sales in 2017, as most net sellers have already delivered on their reweighting strategies,” Fenton says.

“Aside from some smaller privately held portfolios and corporate sale-and-leaseback deals, we expect portfolio sales to be half the volume recorded in the previous two years.”

“Established investors are now expected to turn their attention to creating their own product through development. This is likely to create upward pressure on land values, particularly in the core markets on the eastern seaboard.”

According to Fenton, markets around new and future infrastructure projects will be the main focus, particularly in Western Melbourne and around Sydney’s Badgerys’s Creek and Moorebank areas.

Generally unzoned, these land parcels won’t be available for immediate development and, as such, won’t impact supply levels in the short to medium term.

“We’ll still see a continued strong run in rental growth and land values in these markets,” says Fenton. “But, land owners in these precincts, who are typically private owners, will be able to take advantage of the spike in land values created by more capital looking to establish a long term development pipeline in key markets,” he says.


Michael Fenton

Head of Industrial, JLL Australia

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