Since COVID-19 struck fear in the global economy, there has been an accelerated structural transition towards e-commerce causing investor appetite for industrial property to surge and for the asset class to outperform all other mainstream real estate sectors.
The funds chasing industrial properties have driven capitalisation rates for A-REIT industrial assets to firm to an average of 5.4% and it is forecast that this yield will further compress to below 5% by the end of 2021. Debt capital markets are singing to the same tune. Banks are actively reweighting their lending books towards the industrial sector and are prepared to increase loan to value ratios for industrial developments based on the perceived attractive risk profile of the asset class.
The question remains, has the surge gone too far, or is this simply the tip of the iceberg? In this paper, we explore the reasons behind the increasing investor demand for industrial property, and the changing nature of the asset class as it evolves to the new economic environment.Download PDF