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Industrial Property

Fears Wharf Strikes Will Bring Construction to its Knees

construction

The construction industry has been dealt another blow as industrial action cripples ports across Australia, adding pressure to an already constrained construction materials supply chain.

The Maritime Union of Australia has launched strike action at Patricks Wharfs at Sydney, Melbourne, Brisbane and Fremantle, in a campaign for pay rises and increased union control of manning levels and hiring.

Port Botany wharfies in Sydney will strike next weekend, while Melbourne wharfies plan to strike every second day in October.

Master Builders Australia chief executive Denita Wawn has condemned the industrial action, which she said would paralyse the industry.

“More than $10 billion in building products was imported in the past 12 months and these strikes will hammer the building supply chain which is already under huge pressure,” Wawn said.

“Our members are already experiencing long delays and substantial cost increases due to product shortages and these strikes will make it even harder for building and construction businesses across the country.

“There’s absolutely no doubt these strikes risk hurting the recovery from Covid as governments around the country are harnessing the building industry’s economic multiplier effect to accelerate economic activity and growth.”

Container ships have been waiting up to 18 days at berth in Sydney as a result of the industrial action while negotiations have stalemated once more.

 construction

▲ Freight times on construction materials will be pushed out as ships sit in berth for up to 18 days during industrial action. 

The property industry has underpinned Australia’s Covid-19 economic recovery and produces about 13 per cent of the nation’s gross domestic product.

It has been grappling with steel and timber shortages as a result of global supply chain issues and the tailwinds of the HomeBuilder stimulus package fuelling a construction boom.

According to the Housing Industry Association, 82 per cent of builders are reporting delays with supply or trade, and there is about a 15-week lead time on timber trusses and frames, but this could blow out significantly with port industrial action.

Patrick Terminals chief executive Michael Jovic said the company had been in negotiations with the Maritime Union of Australia since February 2020, and they had an offer on the table for a 2.5 per cent pay rise over the next four years.

The ongoing industrial dispute has reportedly cost Patrick Terminals more than $15 million in revenue, which the union has rejected, while impacting supply chains across the country.

Wharf industrial action was also brought to the Fair Work Commission at this time last year, where claims were made it was delaying supply chains by up to three weeks.

But supply chain disruptions to the construction industry are likely to persist beyond the middle of 2022, according to a global risk survey released recently.

The Oxford Economics survey found one in eight businesses surveyed this month said they had been “severely affected” by supply chain interruptions, and half of respondents said they expected the Delta outbreaks to affect their businesses well into next year.

The Property Council of Australia said labour and material shortages driving up the cost of construction jobs and disruptions caused by the pandemic had delayed projects. Material shortages are at their worst in four decades.

The Australian Competition and Consumer Commission is already investigating reports of price gouging in the shipping industry, and is due to release its annual stevedoring monitoring report in November.

 

Article Source: www.theurbandeveloper.com

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Industrial Property

Centuria Invests $129m on East Coast Industrial Assets

Centuria

Centuria has boosted its pure-play industrial fund with four assets in New South Wales, Victoria and Queensland to take its real estate investment trust portfolio to more than $3.6 billion in assets.

More than 80 per cent of the acquisitions are weighted to the hotly contested Sydney and Melbourne industrial markets on yields as low as 3.7 per cent.

Centuria Industrial REIT (CIP) fund manager Jesse Curtis said the acquisitions were strategic within tightly held industrial markets that were benefiting from low vacancy rates and increasing rental prices and demand.

“The acquisitions lend themselves to last-mile logistics and distribution tenant customers and benefit from strong tailwinds across Australia’s industrial sector, particularly from the strong rise in eCommerce adoption and supply chain onshoring,” Curtis said.

“These assets align with CIP’s strategy to acquire assets located in land constrained urban infill markets, where tenant demand currently outstrips forecast supply.

“The portfolio of assets provides a number of opportunities to actively manage the portfolio to add value through capturing outsized rental growth from under-renting of the assets and potential development or activating higher and better use potential.”

Curtis said the 3.7 per cent yield on the $70-million transaction of 82 Rodeo Road at Gregory Hills in south-west Sydney was comparable to international industrial yields, following significant compression over the past two years.

CIP’s Sydney sub portfolio is now worth more than $1 billion after almost $370 million in transactions this year.

“Throughout the past 12 months, the prime Sydney industrial market has aligned itself more closely with global market yields due to eCommerce customer demand driving tenant requirements for warehousing within close proximity to a large population catchment,” Curtis said.

“Gregory Hills is highly desirable given south-west Sydney’s strong population growth and excellent connectivity to major arterials roads, accessing a large distribution network.”

CIP also spent more than $20 million on a Derrimut industrial facility, $18 million on a 2392sq m site at Port Melbourne, and $20.8 million on an industrial estate at Coopers Plains in Brisbane.

Colliers International’s Gavin Bishop, Sean Thompson and Fab Dalfonso were the agents for the Gregory Hills transaction. Simon Beirne and Levi Maxwell, also from Colliers, were appointed agents for Coopers Plains.

CBRE’s Ben Hegerty was the agent for the Derrimut transaction and Dawkins Occhiuto’s Chris Jones and Walter Occhiuto were the agents for the Port Melbourne transaction.

The weighted average lease expiry across the four sites is 3.5 years, with an average yield of 4 per cent.

 

Article Source: www.theurbandeveloper.com

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Industrial Property

Industrial Sector Hot Streak Far From Over

Industrial

Industrial property has been white hot during the past few years, thanks to the booming e-commerce sector, improvements in automation and demand for last-mile logistics.

Global supply chain disruptions last year, especially in retail, have resulted in rising inventory requirements and greater demand for space. These trends, along with strong leasing demand, are continuing to drive growth in the sector.

“In this competitive market, sourcing the right assets is important and we look for assets in strategic locations where we can add value through development and active asset management,” Lendlease Investment Management managing director Scott Mosely says.

“We recently acquired two facilities in Altona that adjoin existing fund holdings and this creates multiple opportunities for us to expand and develop them, and add value for our investors.”

During the past few months, Lendlease has acquired around $720 million in industrial assets, including a mix of established assets and development sites.

“The outlook for the sector remains bright for the right assets in strategic locations. The leasing market is particularly strong and we continue to see strong levels of enquiry,” Mosely says.

Industrial

▲ More than $8 billion has been invested in Australia’s booming industrial market this year. 

CBRE industrial and logistics executive director Chris O’Brien agrees the continued evolution of e-commerce and high demand for warehouse space has helped drive yield compression to historically low levels, with current pricing reflecting incredibly tight vacancy levels and strong rental growth forecasts.

He says lockdowns are positively affecting prices.

“There is a direct correlation between disruption to the markets due to lockdowns and an uptick in appetite for industrial and logistics assets, which are seen as defensive,” O’Brien says.

“Conveniently, it’s also one of the easier asset classes to assess sight unseen or virtually, given many properties are single-tenanted and offer net leases.”

O’Brien says the industrial property market is yet to peak, given the continued weight of capital, occupier demand and declining vacancy rates: “We consider continued yield compression is highly likely, combined with incremental rental growth.”

Looking ahead, CBRE anticipates a continued increase in property values for the remainder of the year and beyond as a result of yield compression and continued rental growth.

Australian Unity’s head of property research Damian Diamantopoulos says Covid has emphasised the importance of exposure to resilient income-generating assets.

“Industrial property is supported by strong e-commerce sales thanks to stay-at-home orders,” he said.

“Investors want long-lease duration properties underpinned by strong corporates, big box retail and self-storage.”

Diamantopoulos says industrial property prices are being driven by improving business and consumer sentiment, Australia’s success in supporting its economy and an extremely low interest rate environment, which enhances the relative attraction of property as an asset class.

Industrial

▲ E-commerce tailwinds and robust leasing demand has supercharged infrastructure investment with about $110 billion in the pipeline over the next decade. 

“On the whole, direct property total returns remain largely underpinned by asset-produced income.

“Industrial property is the clear exception, where returns have been strongly influenced by the weight of capital chasing these assets.

“When we look at the way industrial property has staunchly fended off the pandemic, it’s easy to see why capital growth has been significant.

“Everyone appears to be chasing established industrial properties to buy or, for those with the capability, rolling out industrial developments in abundance.

“Many institutional investors have been underweight in the sector, this helps the demand argument, with recent transactions occurring at yields of around 3.8 per cent to 4.5 per cent.”

Market rent growth remains a key question in the industrial sector and has at times proved elusive. The question is whether this time will be different.

“Leasing conditions remain strong and occupancy rates are high. Retail e-commerce tenants continue to want warehouse and logistics space, as well as pharmaceutical and other essential service tenants,” Diamantopoulos says.

“Automation and inventory build ups are also adding to this positive tailwind.”

Recent transaction evidence shows industrial properties trading at yields of circa 4 per cent—essentially tighter levels than office and retail properties.

“Listed A-REITs are valuing their industrial properties at 4.5 per cent cap rates at June 30, so it appears a tad more valuation uplift and cap rate tightening is to come, based on recent sales,” Diamantopoulos says.

While yield spreads over 10-year bonds have narrowed in the industrial sector, deals are not slowing down. Growth prospects for industrial assets are expected to outstrip office and retail during the 2022 financial year.

APRIL 

Asia Pacific logistics and real estate platform ESR bought Blackstone’s Milestone industrial portfolio for $3.8 billion, reflecting a cap rate of around four per cent.

The portfolio comprises 45 assets in Melbourne, Sydney, Brisbane, Adelaide and Perth and houses 100 different tenants, including Lineage Logistics, WesTrac, Toll and Woolworths.

At the time, the transaction reflected a very sharp cap rate that was assumed to have included a portfolio premium—transactions have since firmed.

MAY

AMP Capital sells a Sydney logistics facility leased to Best & Less at 1 Eucalyptus Place, Eastern Creek to Lendlease for $130 million on a yield of 3.62 per cent.

The 35,000sq m industrial property is the national distribution hub for Best & Less and was transacted at the sharpest yield for an Australian institutional grade industrial asset to date.

AUGUST 

Lendlease’s Australian Prime Property Fund Industrial acquires a portfolio of three assets from the Mirvac Industrial Logistics Partnership for approximately $161 million, increasing the fund’s portfolio to 39 assets.

GPT acquired a Spotlight warehouse in Laverton North, Victoria from a private investor for $73 million, representing a tight yield of 3.8 per cent.

The recently refurbished 33,360sq m warehouse is fully leased to Spotlight for a five-year term, and features 31,306sq m of high-clearance space as well as 2,052 sq m of corporate offices and staff amenities.

Charter Hall acquires two industrial assets at South Guildford in Perth’s industrial precinct for $50.75 million, reflecting a 4.35 per cent yield.

Excluding 8000sq m of vacant land, the acquisition was said to reflect a yield of 4.5 per cent.

The facilities have an 8.5 year WALE and are occupied by Cleanaway and Chemist Warehouse. The acquisition includes a large component of unused land which provides development potential.

Dexus acquired the McPhee Super Core Logistics portfolio for $186 million on a yield slightly above 4 per cent. The four properties comprise more than 70,000sq m of industrial space on an average lease expiry of 6.7 years.

The portfolio includes a warehouse occupied by Australia Post at Truganina in Melbourne’s west with room for expansion, with three more logistics facilities at Berrinba in Queensland. Other major tenants in the portfolio include McPhee Transport, TLS and Rinnai.

GPT acquired Ascot Capital’s 28-asset portfolio for around $825 million, representing a yield of around 4.4 per cent across the portfolio, according to media reports.

The yield on the industrial portion of the portfolio was said to be around 4 per cent. The portfolio has 24 logistics assets and four offices.

SEPTEMBER 

Lendlease, in a 50-50 joint venture partnership with an investment vehicle sponsored by Morgan Stanley Real Estate Investing, acquired a portfolio of eight industrial assets from a private logistics group.

The assets comprises five leased industrial facilities, each with 15-year WALEs, and three development sites, with a developed value of around $430 million.

Centuria Industrial REIT acquired a portfolio of eight industrial properties across Sydney, Melbourne, Brisbane and Perth for $351 million on a blended initial yield of 4.1 per cent.

The centrepiece property is a $200.2-million super-prime distribution centre in Fairfield NSW.

 

Article Source: www.theurbandeveloper.com

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Developments

$50 million penthouses: Gurner to raise the bar as $1.5 billion development plans for South Yarra’s Jam Factory are unveiled

Gurner

Our vision for the residential offerings will raise the bar in the luxury market even higher; I wouldn’t be surprised if we create a penthouse collection that will fetch prices of up to $50 million

There wasn’t too much to know about South Yarra’s old jam factory on the buzzing Chapel Street, until the prominent, now national developer, Tim Gurner took control of a part of the massive 18,000 sqm site.

Now Gurner’s development firm, Gurner, are set to submit plans for a massive $1.5 billion mixed-use precinct, comprising retail and entertainment, office and residential towers, an ultra-luxury hotel and a new public realm.

The globally renowned architects Bates Smart have put together the plans for the project, which is intended to create a vibrant new heart for Chapel Street while revitalising and restoring the Nineteenth Century heritage facades along Chapel and Garden Streets.

The development sees Gurner team up with the real estate manager Newmark Capital, who will deliver and retain ownership of the office space, and the leading real estate financier Qualitas, who will work with Gurner on the residential side. Gurner and Qualitas bought a chunk of the site from Newmark last year.

The expected public benefits include the creation of 1000 jobs during construction, 3200 ongoing jobs at capacity and $490M annual ongoing GVA to the Victorian economy.  The project is slated to launch publicly to the market in early 2022 with completion earmarked for 2025.

Gurner says the exciting precinct represents the alliance of three passionate property businesses working in harmony to create something that will do the incredible site justice and take everyone’s breath away.

Gurner

“Our vision for the residential offerings will raise the bar in the luxury market even higher; I wouldn’t be surprised if we create a penthouse collection that will fetch prices of up to $50 million,” Gurner said.

“The depth of the ultra-high end of the market is certainly there and we believe there will be significant investment from wealthy expats and global investors returning to Australia after considerable time abroad, along with a doubling-down of local luxury buyers.

“This project will see us take what we have learnt over the past 17 years – in particular our recent experience with Hawksburn Place Residences and Saint Moritz – and take these residences to a new level of exclusivity and luxury once again.

“I have always been drawn to heritage sites and the Jam Factory represents one of the most exciting revitalisation precincts in Australia. I am truly excited to be working on a project that will rediscover and celebrate a heritage that has been hidden from public view for many decades.

Gurner

Gurner says the team have been working closely with council to align the proposal with their feedback and advice, to ensure the development can be a precinct for the entire community – with something for everyone who will work, live, shop or even just pass through the area.

The centrepiece of the precinct will be a new split-level central public space with a large open staircase creating an amphitheatre for events

Open laneways and spaces will link Chapel Street with the retail and entertainment precinct, creating a 24/7 shopping, food, dining and entertainment destination.

There will be four luxury residential towers, which will have over 400 apartments.

In keeping with Gurner’s love for heritage buildings, the facade of the jam factory will be retained. Above will sit a curvilinear office building and a the residential towers, sat on stilts to welcome both people and light through.

Simon Swaney, director at Bates Smart, said there is a multiplier effect for the development given it combines hotel, retail, residential, cinemas and commercial – creating a greater whole.

“This will be an extraordinary place to work, visit and live,” Swaney said.

“It is a key Melbourne cultural site, a part of urban life in South Yarra, a very significant artefact of the industrial heritage of this area.

“The high-quality residential component will offer outstanding views to surrounding districts and even toward the bay.

“We feel excited and proud about the opportunities, both architecturally and as a development that will enliven this area and Melbourne,” he said.

Fast Facts

The proposed revised scheme, which is expected to be submitted to council this week, includes:

● A new public civic space in the form of a 1,700sqm, two-level plaza and amphitheatre

● Four luxury residential towers totalling over 400 ultra-luxury residences

● A 5-star hotel totalling around 180 keys

● A commercial floorspace totalling 22,500sqm of NLA

● Three levels of experiential retail and entertainment totalling 21,000sqm NLA, including the retention and redevelopment of the existing cinema offering

● A series of integrated laneways, based on the area’s original 1864 master plans

 

Article Source: www.urban.com.au

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