Australian industrial transaction volumes ‘subdued’ at $2.5m in Q3

Brisbane attracted smaller private capital whilst Sydney and Melbourne got larger deals.

According to a report from Dexus Research, industrial pricing in Australia began to reflect the pinch from a higher cost of capital in Q3 2022 as buyers adjusted their price expectations. 

The largest corrections were felt within the Sydney and Melbourne markets with average prime yields lifting by around 50bps. Moves were less pronounced in other markets, given wider spreads over bond yields. 

Here’s more from Dexus Research:

Transaction volumes were subdued over the quarter at $2.5m sqm as buyers became more selective in their approach. Smaller private capital was focused towards the Brisbane market sub 10,000sqm, while larger institutional capital continued to favour Sydney and Melbourne, particularly for land development opportunities. Land values remained steady over the quarter after a strong run, however they could come under pressure from rising cap rates in the year ahead. 

Strong occupier demand and very low levels of vacancy continued to place upwards pressure on rents with double digit quarterly growth achieved in some markets, notably outer West Sydney, South West Sydney and Perth. 

Occupier demand has remained robust despite increasing domestic cost pressures. Container delays have had a positive influence on demand as occupiers increased inventory levels to compensate. Although congestion in Chinese ports appears to be improving, signalled by increased container volumes, it is likely the backlog of demand will continue to impact wait times at sea. 

A reduction in shipping costs looks to somewhat alleviate supply chain pressures, however reliability remains a key concern. Shipping costs have declined by around 50% since Q1 2022 assisted by increased container production in China, capacity along key export routes and a softening in Chinese exports. While the cost reduction will have a positive effect across the broader supply chain, it is not expected to offset the imperative for businesses to minimise transport costs by locating around key logistics infrastructure.