Australia’s logistics and industrial (L&I) investment market is experiencing a robust recovery after a prolonged period of pricing dislocation.
Year-to-date transaction volumes and deal values have significantly outpaced the same period last year, indicating growing confidence among domestic private investors and global investors re-entering the market.
In the year leading up to early September 2024, approximately $3.8 billion worth of income-producing assets have been traded, marking a 50 per cent increase from 2023 transactions.
The Victorian L&I market has taken the lead, accounting for 56 per cent of Australia-wide transaction volumes, with 25 assets totalling $2.16 billion traded so far this year.
New South Wales and Queensland follow with $805 million and $704 million in recorded L&I investment transactions, respectively.
Chris Jones, Cushman & Wakefield’s National Director of Capital Markets Logistics & Industrial for ANZ, attributed this resurgence to a combination of macro factors and investor confidence.
He noted: “We’ve seen L&I investment volumes bottom out globally and have recorded a material uptick in transaction activity over the past quarter.”
Jones added that increased certainty around interest rates in Australia is supporting investor confidence and enabling larger asset acquisitions, as evidenced by the 28 per cent jump in average deal sizes in 2024.
The market recovery is particularly evident in the $100 million-plus acquisitions segment, which now accounts for 67 per cent of total investment volumes in 2024, up from 50 per cent in 2023.
Investors are targeting assets offering immediate or short-term positive rental reversion, with the weighted average lease expiry (WALE) at 4.6 years, boosted by high-profile deals like the Goodman Portfolio.
Charlie Holmes, Cushman & Wakefield’s Associate Director of Capital Markets Logistics & Industrial for Victoria, highlighted the growing role of superannuation funds and private investment groups in shaping the sector’s capital flows.
Superannuation funds have become the most active buyers by volume, led by acquisitions from groups like Rest and Aware Super.
In Victoria, 81 per cent of investment has come from domestic purchasers.
Private capital and family offices are also scaling up their investments, moving beyond their historical sub-$30 million bracket to make multiple acquisitions above $80 million, indicating an increasing willingness to take on larger, more strategic assets.
The outlook for L&I yields remains closely tied to interest rates, with an inflection point expected in Q1 2025.
Cushman & Wakefield’s base case scenario anticipates 100 basis points of rate cuts in 2025, beginning in the first quarter, which is expected to significantly compress L&I yields.
Jones concluded with an optimistic outlook, stating: “History shows that the strongest returns often follow periods of dislocation and financial stress.”
This suggests potential opportunities for investors in the recovering L&I market.
