Australians are flocking to online retailing, and this is driving extraordinary demand for commercial property, in particular industrial assets such as warehouses and logistics facilities.
Australia’s Industrial & Logistics vacancy rate is currently at 0.8%, the lowest rate in modern history, and the lowest rate across the globe according to CBRE research.
The significant growth in demand for industrial assets reflects Australia’s e-commerce penetration rate, which has hit a record 14% (CBRE research), much of this driven by escalating demand for online shopping through the pandemic.
However, these incredibly low vacancy rates aren’t just a demand-driven phenomenon.
As CBRE notes, Australia has a “chronic shortage of supply” of industrial property. With new development projects being delayed due to materials shortages, the world-beating vacancy rate is unlikely to change until at least 2023.
Westbridge achieves 100% occupancy
Record demand for commercial property is being experienced first-hand by the Westbridge team.
Westbridge’s suite of commercial property funds have a 100% occupancy rate, with a total portfolio spanning 121 tenants.
Our Chairman, Damian Collins, says this hasn’t just happened by chance.
“The assets in our funds are hand-selected based on the key fundamentals of a highly desirable location offering close proximity to strong transport networks, as well as the factor of limited supply.”
“Importantly, however, we’re also selecting sites that can be adapted for future uses. In this way, we ensure each asset is not just attractive to the current tenant, but can also meet future market demand and layout requirements – a critical factor in preserving high occupancy rates both now and into the future,” says Damian.
Proactive management crucial to vacancy success
Our Head of Commercial Funds, Alex Lambert, says the team’s approach to managing the assets in Westbridge’s portfolio has been a critical factor underpinning the vacancy success.
“Together, our funds management and leasing teams have always maintained a proactive approach in identifying opportunities to maximise each asset’s leasing potential while mitigating potential cashflow risks.”
“This has included everything from identifying potential to maximise lettable area, undertaking capital improvements to lift both capital and rental value, and early engagement in negotiating with tenants to secure lease extensions,” he says.
Alex believes having a commercial property management division in-house has delivered a significant advantage to the Westbridge Funds Management team.
“It means our tenants have direct lines of communication to our funds management team, allowing better risk management, a more transparent view on cashflow, and greater insights into potential growth opportunities,” he says.
Alex adds: “Our team executed 13 lease transactions in the 2022 financial year, for a gross annual rent of $6.7 million – a result that would have been difficult to achieve without this capability in-house.”
Perth a key target for commercial property
Looking ahead, the team believe Perth is well-placed to take advantage of continued demand for commercial property.
As companies opt to expand their geographic footprint and take control of their warehousing facilities, many are looking beyond the Sydney and Melbourne markets.
This has dramatically pushed down the industrial vacancy rate in Perth to just 0.5%, with tenants particularly attracted to the continued confidence of the WA state economy.
“In addition to growing interest from logistic operators, we’re also seeing increased demand for industrial property from WA-based mining companies, many of whom are expanding their operations in response to the thriving resources sector,” says Damian.
He concludes, “There is no doubt the commercial property market in WA is very robust at present, particularly in the industrial space, which is certainly something we’re considering in our acquisition strategy moving forward.”
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This information has been prepared by Westbridge Funds Management as a general guide only. It does not constitute an offer for sale, or solicitation for the purchase of securities, financial products or other investments. It should not be relied upon to determine or to make decisions about the investment objectives, financial situation or individual needs of any person. Westbridge Funds Management recommends investors seek professional advice before making a decision to invest. Westbridge Funds Management and its related entities do not make any representations or give any warranties that the information contained within is or will remain accurate or complete at all times and they disclaim all liability for harm, loss, costs, or damage which arises in connection with the use or reliance on the information. Manager, Responsible Entity and Product issuer: Westbridge Funds Pty Ltd ABN 33 652 852 214 AFSL 533936. Mair Property Funds Limited ABN 48 151 957 676 t/a Westbridge Asset Management. Mair Property Securities Limited ABN 28 091 623 862. AFS License 238386. Momentum Wealth Projects Pty Ltd ABN 29 090 792 439 t/a Westbridge Urban.