Retail investor appetite rising for industrial assets

One of Australia’s biggest fund managers says demand from ‘mum and dad’ investors is underpinning its latest industrial property fund, against a backdrop of rising appetite for strong-performing commercial assets.

ASX-listed fund manager Centuria said it recently acquired two properties worth $50 million for its Centuria Diversified Property Fund, which it established to cash in on the growing appetite from unsophisticated and retail level investors for industrial property.

Of the two properties, a 5.4 hectare development site in Direk, South Australia was sold for $38.25 million, with a pre-lease agreement in place to develop a 22,000 square metre warehouse for Apex Steel Suppliers.

The other asset is a vehicle maintenance depot located in the Perth northern suburb of Malaga, which is fully leased to Cleanaway Waste Management. 

Centuria joint chief executive Jason Huljich said the properties were the first industrial acquisitions for the five-year old fund.

“There is strong appetite from retail investors to secure quality industrial logistics assets that deliver compelling yields, especially in this low interest rate environment,” Mr Huljich said.

“We have seen this for our unlisted, fixed-term Centuria Industrial Income Fund No 1, which was oversubscribed in February with more than $40 million raised predominantly from mum and dad investors, and in New Zealand we raised approximately $110 million for the single-asset Visy glass manufacturing facility fund.

“These market conditions often attract the interest of offshore institutions, which is why we aim to secure Australian assets for Aussie retail investors through our unlisted fund offerings.”

Centuria’s CDPF has been delivering an annual net return of 12.96 per cent for investors, with its portfolio comprising six direct assets and nine indirect investments in unlisted funds and listed retail investment trusts.

Head of funds management Ross Lees said the industrial additions were in line with investor demand.

“CDPF is committed to generating quality income streams underpinned by strong management capabilities across a portfolio of quality property assets,'' Mr Lees said.

Meanwhile, global commercial property agency Savills is reporting a strong increase in demand for commercial and industrial assets in New South Wales regional hubs such as Newcastle, Gosford and Wollongong.

Savills Australia capital transactions associate Ollie Ridley said institutional investors had been particularly interested in office investments in regional NSW, on the back of changing working practices and a corporate focus on flexible and remote working due to the pandemic.

“Newcastle has emerged as one of the most resilient office markets, while a majority of Australian CBD markets have experienced a decline in demand and rising vacancy rates with many businesses shedding underused floor space,” Mr Ridley said.

“The Newcastle market has, however, outperformed other regional cities with only a marginal increase in vacancy rates from 7.6 per cent (in 2020) to 7.8 per cent in 2021.”

Mr Ridley said Wollongong was also setting new record levels for investment, with the sale of the ATO Building a demonstration of the appetite for assets with strong lease profiles.

“Gosford is becoming another key regional hub for investment and development as major infrastructure and residential development projects are set to transform the Central Coast city,” he said.