For the past ten years, Australia’s burgeoning economy has played an increasingly important role on the global stage with the growth of the country’s overall trade volumes outpacing most of its global counterparts. Export and import merchandise volumes have risen at a faster pace than any other advanced economy since 2005. In fact, having not suffered a recession since 1991, Australia can now claim the record for the longest uninterrupted expansion in modern history.
The growth has not escaped the notice of the world’s investors, many of whom have looked to the country’s real estate markets in the search for yield – notably the residential sector.
But, according to the latest report from JLL, other sectors are also benefiting from offshore money with the beef, dairy and pharmaceutical industries attracting attention from foreign investors, while tourism and education have seen a similar influx; but it’s the Industrial and Logistics sector that will be the real winner.
“We’re seeing a structural shift in Australia’s manufacturing as a result of foreign investment,” explains Michael Fenton, JLL’s Head of Industrial in Australia. “The ongoing closure of the car manufacturing sector has coincided with the growth of other sectors – all of which are increasing demand for industrial space.”
Partners in trade
With foreign demand for non-motoring export products on the rise, and a decade of dynamic market shift behind it, Australia’s logistics and industrial property sectors are now poised to capitalise on recently concluded free-trade agreements (FTAs) with China, Japan and Korea as Australian producers adapt their practices to cater to the requirements of these countries.”
“The Chinese economy, in particular, is moving from a production to consumer phase in growth,’ explains Fenton. “A rise in the middle class has generated demand for high quality health and consumer products, for which Australia has a solid reputation, as well as dairy, wine and other food products.”
The new FTAs will further reduce restrictions on the movement of people, benefitting Australia’s already-booming tourist and student population from Asia and, in turn, supporting the growth of retail, hospitality and industrial sectors.
“The more indirect impacts of the FTAs on the Australian industrial sector are likely to continue,” says Fenton. “The sector will be called upon to support the requirements from increased tourist and student activity while also meeting a rise in demand for exports. More specifically, we could potentially see the requirement for more temperature-controlled distribution centres to facilitate the export of dairy and food product.”
A special relationship
Of all the country’s export destinations, China remains the most important buying more than 32 percent of exports last year and remaining the country’s largest trading partner.
While Chinese property investors have typically targeted Australian residential markets, their attention may be turning towards the industrial sector.
“We are closely following the increased Chinese interests in industrial direct investment, most notably China’s sovereign wealth fund – China Investment Corporation (CIC),” Fenton says, noting the fund is close to the final stages of acquiring the €12 billion London-based European logistics platform, Blackstone Logicor. The acquisition may be indicative of rising Chinese appetite for industrial and logistics property assets, globally.
Fenton believes demand for Australian exports will only increase with the anticipated depreciation of the Australian dollar, given the projected outcomes of the diverged monetary rate policy with the United States.
“Most importantly for Australia, the Chinese growth rate has gathered pace in the past year and this signals good news for Australia’s income and output which, in turn, could mean additional attention from foreign investors for Australian industrial property.”
Click here to read the latest JLL Australia Industrial investment report.