Industrial RFR Second Half 2015

Evolution of
warehouses
How industrial
has transformed
INDUSTRIAL
Second Half 2015
Australia and New Zealand
Research and
Forecast Report
Accelerating success.

RETAIL
First Half 2015
Australia and New Zealand
Research and
Forecast Report
Size does matter
Large format retail outperforms
HOTELS
Second Half 2015
Australia
Research and
Forecast Report
Destination Australia
Arrivals increase as accommodation
sector takes off
Improve your perspective. We have.
Property Research worth talking about. www.colliers.com.au/subscribe
Changing
of the guard
Boutique to corporate -
a shift in ownership
HEALTHCARE AND RETIREMENT LIVING
2015
Australia
Research and
Forecast report
New breed of tenants
Strategic owners adapt to change
CBD OFFICE
Second Half 2015
Australia & New Zealand
Research and
Forecast report
Nerida Conisbee
National Director | Research
+61 439 395 102
nerida.conisbee@colliers.com
Luke Dixon
Associate Director | Research
+61 417 118 071
luke.dixon@colliers.com
Want better insights, faster? Talk to a Colliers Edge expert today
colliers.com.au/colliersedge
Want real time data that matters most to your business?
Colliers Edge is a subscription service developed by our in-house property research
specialists, drawing on the expertise of our national network of operators.
We provide clients with a quarterly series of real estate data, collected in a consistent and
timely manner to ensure the highest standard of quality.
Colliers Edge has the longest data time series for office, industrial and retail markets across
all major Australian cities. Updated quarterly, Colliers Edge is an all-encompassing data
analytics tool that can help your business make informed decisions.

Metro Office
INDUSTRIAL
The rise of the robots 5
Our perspective – Industrial 12
Industrial market overview
Sydney 14
Melbourne 20
Brisbane 25
Perth 30
Adelaide 33
Newcastle 36
Auckland 38
Wellington 39
Christchurch 40
Our experience – Industrial 42
Contents
How else can we help you?
Speak to one of our property experts today.
au.industrial@colliers.com
Partner with our Research
and Consultancy team
Ourhighlyexperiencedteamofprofessionalscan
partnerwithyoutoensureyournextprojecthas
a positive outcome. we deliver strategic advice
acrossafullrangeofpropertysectors,ensuring
that your decisions are fully informed.
au.consultancy@colliers.com
For more information about
ColliersInternational
and working with us visit:
www.colliers.com.au
Cover image: ‘Inserrt text here’. Photographer Name Name.
3Industrial | Research & Forecast Report | Second Half 2015

Coles Chilled Distribution Centre, 3 Roberts Road, Eastern Creek NSW
Sold on behalf of Goodman
4 A Colliers International publication

Metro Office
INDUSTRIAL
The rise of the robots?
The growing sophistication of our warehouses
By Nerida Conisbee
National Director | Research
nerida.conisbee@colliers.com
Changing occupier requirements are the main driver behind the growing sophistication of industrial
property. Warehousing has historically been one of the more passive property types however growth
in eCommerce and the globalisation of logistics have driven innovative changes to internal fit out
requirements. This is leading to greater complexities for occupiers and developers.
Distribution centres are now far more dynamic – goods are moving faster, higher clearances are required
and there is greater demand for natural light and better performing slabs. Occupiers are changing with
third party logistics (3PL) experiencing enormous growth and supermarket groups becoming more
sophisticated in how they move goods through their distribution channels. Ecommerce providers frequently
require specialist internal design and fit out of their warehouses.
While change is occurring, there is still a wide variation in how occupiers are utilising their space. From
highly automated picking systems requiring very little human interaction to boxes on the floor with paper
based systems tracking stock levels, the evolution depends on the rate of change in the industry in which
the occupier operates.
Change 1: eCommerce
Growth in eCommerce
More retail trade is moving to eCommerce, although it still remains relatively small compared to traditional
bricks and mortar retailing. Although in recent months the weakening of the Australian dollar and the
implementation of Goods and Services Tax (GST) on goods bought online from overseas has led to a
slowing of eCommerce, it is forecast that for some product types, there will continue to be erosion of
spending in traditional bricks and mortar retailing.
The biggest challenge for eCommerce in Australia is the cost of getting goods from the warehouse to
consumers. The vast distances that need to be covered and the insatiable demand from consumers to get
goods quickly can make delivering goods particularly expensive. For many operators, rent on a warehouse
is a secondary consideration compared to the cost of logistics.
For traditional retailers with an eCommerce presence, the majority of purchases are still filled out of
store. There are generally no specialist online warehouses or special systems developed within existing
warehouses to fulfil orders. An exception to this is for particularly large items (e.g. fridges) that are
delivered directly from a warehouse to customer rather than from a store when an online order is made.
This is starting to change for larger retailers. Major supermarket chains previously filled online orders from
a store hub but are now starting to use “dark supermarkets”; basically a supermarket in a warehouse,
inaccessible to consumers, where staff fulfil online orders. The perishable nature of grocery items means
that it is likely that these dark supermarkets will need to be located in each capital city, as opposed to just
one location.
For pure eCommerce groups, the way that they warehouse their goods and handle delivery depends on
the type of product they sell, the size of the business and where they source their goods. For most groups,
a 3PL service is utilised. The extent to which they use 3PL differs with some using them for delivery only,
with others using them for the full end to end service. At its most complete level, 3PL can be used for an

eCommerce provider to provide a service from when a consumer
presses “buy” on an online site to delivery or even return if the item.
For large groups selling non-perishable goods that can be delivered
in a small parcel, having only one warehouse in Australia makes the
most sense. The cost of delivering goods in Australia is generally
not dependent on distance and the nature of eCommerce means
that it is difficult to predict where the next order will come from.
Most products are produced offshore and hence close proximity to
a major port is also generally a requirement for occupiers.
CASE STUDY: eCommerce
Catch of the Day
Catch of the Day is part of the Catch Group, Australia’s largest
eCommerce group. Originally started in 2006 as an Australian
“flash” sale site , Catch of the Day sold goods at low prices in a
daily deals format. Over the years the business has grown and sales
strategies have changed and the business now fulfils approximately
10,000 orders per day with up to 18,000 per day during peak times.
Catch Group manage their own warehouse but use Australia Post for
the end delivery to customers. Their main reason for using Australia
Post is that they offer the most comprehensive “last mile” delivery
solution to customers.
Catch of the Day operate from a 26,000sqm warehouse in Truganina
in Melbourne’s west having previously utilised a mix of in-house
and outsourced, 3PL services. The business however considers
fulfilment is a key differentiator in the provision of service and are
now at a size and stage in their growth cycle in which it makes
more sense to operate their own warehouse. The group experienced
strong growth in their early days and went through four warehouses
in five years and have spent more than $15 million automating their
warehouse operations in the last 12 months. The operation now
utilises manual narrow aisle forklifts, extensive pallet storage and
a highly advanced automated picking system. This investment has
allowed Catch to improve the storage capacity and facilitate greater
movement of goods through their warehouse.
With the improvements in efficiency in the operation the business
considers it unlikely that they will need more space in the near
future however growth in this market is not easily predictable. Catch
have also considered geographic diversification and the operation
of satellite sites in each state however given the current sourcing
and selling strategies it does not make sense to split shipments to
different ports as it is never certain as to where they will be sending
individual orders.
The growth of parcels
The growth in online retailing has led to an increase in parcel
delivery services. Australia Post, in particular, is one group that has
continued to change its business model to account for fewer letters
and more parcels. Parcel delivery has emerged as a high volume
business and companies operating these services are one of the
major beneficiaries of eCommerce.
For eCommerce, the main focus of parcel delivery is the “last
mile”. Australia Post have benefitted from having a large post
office network – most Australians are located relatively close to a
post office and if a parcel cannot be delivered in person, they can
be collected from the closest Australia Post depot. Australia Post
has also developed a network of parcel lockers where parcels
can be left and picked up by the recipient. Toll now uses local
newsagencies to provide a last mile service.
CASE STUDY: Delivery
Instacart – the disruptor to traditional parcel delivery?
Instacart is considered to be a major disruptor in the way that
online orders are delivered. The company uses a web based
platform mostly via a smartphone app to match a personal
shopper with a purchaser. The personal shoppers, who are mostly
independent contractors, collect from where the eCommerce
provider stores goods (retail store or warehouse) and deliver
these to the purchaser, with same day delivery service. Payment
is handled by Instacart.
In the start-up phase of the business Instacart charged both a
delivery fee and a mark-up on the items purchased of between
10-20 per cent. As the company has grown this model has changed
5 Inglis Road, Ingleburn NSW
Leased on behalf of Altis Property Partners

Metro Office
INDUSTRIAL
at distribution centres now in excess of 75,000sqm. This trend
to larger facilities, able to handle greater quantities, is expected to
continue to be a trend in global warehousing. In Asia, most cutting
edge facilities are now at least 150,000sqm with the Interlink in
Hong Kong comprising 213,000sqm and Logistic Republic –
Taipei Park in Taipei expected to comprise 264,000sqm
on completion.
CASE STUDY: Logistics
Australia Post – Australia’s changing national
postal service
Australia Post is a government owned entity, initially established
to provide postal services, both within Australia and overseas.
With the rise of email and the move towards digital billing, the
postage business has seen significant decline in mail volumes
over the last decade. This has resulted in the letter business
posting a $328.4 million loss over the 2013-2014 period. With the
decline in the letter business set to continue Australia Post has
needed to both diversify and restructure to continue to operate.
Australia Post, as with many businesses, has experienced
significant market disruption due to technological advances. This
has resulted in the need for the business to evolve and innovate.
A key challenge has been the restructure of the letter business to
stem the growing losses. The true cost of daily delivery and low
cost of postage have all needed to be addressed as part of this
review. Australia Post does however have some key advantages
which are the strength of the retail network and the reach of their
delivery network. This is unrivalled in Australia and allows for a
significant competitive advantage. A key part of Australia Post’s
strategy to diversify is to leverage both of these assets to provide
continued communication services across Australia.
Australia Post has an unrivalled retail network of over 4,000
stores with more than half of these stores located in rural areas.
with Instacart now charging a delivery fee, with a cut of the
total order being paid for by retailers. Retailers have seen an
opportunity to partner with Instacart as an opportunity to
grow sales.
Delivery fees for orders above US$35 can be as low as US$3.99,
dependant on the delivery time specified. The advantage of
Instacart is that it collates orders across retailers and can
therefore reduce its costs accordingly.
As with Uber which has surge pricing, Instacart has ‘busy’
pricing. This is when there is a higher price charged for busy
periods to encourage more personal shoppers to work during
these periods. This is applied for shoppers that have a short
delivery window in busy periods. Shoppers which are regular
users can opt for a yearly subscription with an annual fee of
US$99 which offers free two hour delivery and waves any ‘busy’
pricing fees.
This company has grown dramatically over the last 12 months,
although they are yet to start up in Australia. The number of
employees has grown from 50 employees a year ago to over 200
in the middle of 2015 with expectations that this will grow to over
500 by the end of 2015. The current valuation on the company in
May 2015 was US$2 billion.
Change 2:
Globalisation of
logistics
Logistics has gone global and is becoming more complex and
sophisticated in how it operates. There have been some major
changes to ownership in the logistics industry. Toll Group has
now become part of Japan Post, Australia Post is now the sole
shareholder in Startrack and has been rapidly reinventing itself
as a logistics service provider, while global giant Brookfield
has made a takeover bid for Australian freight logistics
company Asciano.
These changes to ownership structure, as well as increased
usage of 3PL services in Australia has meant enormous growth in
the amount of industrial floor space these groups occupy, as well
as significant investment in more sophisticated and automated
warehousing facilities. The forecast growth these groups expect
is also aggressive. Many of them are now looking to partner with
developers of industrial facilities, particularly those with significant
land holdings, to ensure that they are able to access a pipeline
of development.
A new term for very large warehouses has also emerged.
Campus Style Distribution Centres are now a requirement for
major groups such as DHL and CEVA, both of which are looking
1 Kellet Close, Erskine Park NSW (part of the GIC-Frasers Industrial Portfolio)
Sold on behalf of GIC and Frasers Property Australia

This network of stores in rural areas is of critical importance
to these communities and they have taken the opportunity to
broaden the services that these post offices offer. Also as part
of this they are building the capability of the ‘postie’ being able to
deliver more than letters, which allow the business to leverage
the current delivery network to higher margin products such as
parcel delivery.
Other parts of the diversification strategy include;
• The development of a digital mailbox
• Growing the direct marketing business by providing targeted
strategies using email, physical mail SMS and the digital
mail box
• Development of Decipha which allows businesses to manage
their inbound communications
• Extending services in the retail network, recent examples
include passport & tax file applications, travel services
(travel SIMs, insurance, foreign exchange and merchandise),
and bill payment.
The logistics part of Australia post business has become
increasingly important to the profitability of the business. In 2003,
Australia Post and Qantas embarked on a joint venture to
acquire StarTrack. During 2012 Australia post bought out the
50 per cent share of Qantas, and in exchange they divested their
50 per cent interest in Australian Air Express to Qantas.
StarTrack has undergone a rebranding during 2014 and expanded
the operations to include Messenger post couriers as part of the
StarTrack brand.
Change 3: Design
Who are the leaders in warehousing design?
Historically warehouses have been relatively simple buildings
and there was very little focus put on the internal fit out. This has
changed and the most sophisticated warehouses now have slabs
that can handle greater loads, larger cubic capacity and high bays.
To enable the best use of this space, greater use of robotics and
high-tech picking systems are being implemented.
There is however still significant divergence from these highly
advanced warehouses with more simplistic designs still commonly
in use. At a broad level, it is primarily the large 3PL groups, as
well as large supermarkets and fast moving consumer goods
(FMCG) groups that are the most advanced. The scale required by
these groups, as well as the speed required to move goods, makes
significant investment in fit out worthwhile. They are looking to
create improved efficiencies in better designed buildings.
Another driver of greater cubic capacity, as well as high bays, is
the location of the warehouse. In a market such as Melbourne
where land availability remains abundant, it is unlikely there will be
as much demand. This contrasts to Sydney where land costs are
significantly higher.
There is a greater focus on the indoor working environment of
warehouses. This is to allow better working conditions for staff, but
also better conditions for storing goods. Better ventilation, constant
temperature and high security are a greater focus. The ability to
operate the warehouse 24 hours a day is also frequently a
greater consideration.
Sustainability continues to play a role and more facilities are
moving to a 6 Star Green Star rating. The focus is however less on
committing to minimum targets but looking to achieve demonstrable
cost efficiencies. Developers are looking to add value to occupiers
and this can include offering such inclusions as power off facilities,
advanced monitoring and geothermal generation.
High tech retrieval systems start to make
a mark
There are still only a few occupiers that are using high tech
retrieval systems. The capital costs are so high and hence this
restricts investment for many occupiers. Spending on research and
development of these systems is however continuing to increase
and costs are expected to come down significantly over the next
decade, to the extent that there will continue to be less people
required to operate a warehouse.
There is a range of how sophisticated occupiers are being in the
use if retrieval systems. At the most advanced level, automated
robotics have the ability to completely do away with forklifts
however these are too expensive for most occupiers. Mobile
automation appears to be having quicker take up. An example of
66 Glendenning Road, Glendenning NSW
Sold on behalf of DEXUS Property Group

Metro Office
INDUSTRIAL
this is mini forklifts that are able to operate on any surface. These
forklifts are highly mobile, allow for higher stacking and provide
the ability to pick one item, instead of taking a whole pallet.
CASE STUDY: High tech retrieval
Symbion Contract Logistics – utilising advanced
retrieval systems
Symbion is a major healthcare provider in Australia which
provides logistics service to the healthcare sector, including a
retail network of over 3,500 pharmacies and hospitals. There are
three arms to the business which include Pharmacy Services,
Hospital Services and Contract Logistics. The business was
established in Adelaide in 1945, trading under the name Fauldings
and has now grown to a healthcare provider with an annual
turnover of over $6.1 billion across Australasia. In 2013, the
New Zealand group EBOS acquired Symbion to create one of
the largest Australasian healthcare providers. Symbion have
a network of 12 major distribution centres across Australia.
The business deals with over 550 manufacturers of both
pharmaceutical and over the counter pharmacy products and
carry over 15,000 product lines through their distribution network.
In November 2014, Symbion opened a state of the art 12,000sqm
facility in Keysbourgh in Victoria. This logistics facility utilises
advanced picking technology which services over 750 retail
customers and 150 hospitals daily. The technology which is
being used in this facility is able to automate the picking of
pharmaceuticals at over 10,000 units per hour. Mini load cranes
are also utilised to automatically replenish stock in the picking
areas from high density storage areas which are up to eleven
metres high. The picking technology is able to pick and collate
pharmaceutical orders by customer directly to the operator. The
use of this technology allows for less ‘picking’ errors and faster
processing of customer orders.
The technology used to retrieve stock has been combined with
a SHOP portal, allowing much better communication between
Symbion and the customer. The SHOP portal is a service for
both the pharmacy network and hospitals. It is an innovative way
for the customer to track orders, determine stock levels, places
orders and much more. Key innovations with this
software include:
• Ability for the customer to place and track their order online
• The user can look at live stock levels and if out of stock
select an alternative
• Manage all invoices and credit notes
• Retailers can also use this system to update all of their
retail pricing
• Provision of Immediate Advanced Shipping Notices, which
shows what the customer will be receiving.
The combination of online ordering with the logistics technology
allows Symbion to provide faster, more accurate service to their
customer network.
The risk of obsolescence
With changes to the way warehouses are built, there continues to
be risks of obsolescence. As a result the vacancy rate between
secondary and prime grade stock has increased. In some areas,
such as South Sydney, change of use to residential is allowing
for take up of secondary space however for most industrial
areas, there is limited demand for change of use. In addition,
contamination can also be a problem.
Tenants also want greater flexibility in lease terms and this
also contributes to a potential greater churn in tenants. Smaller
operators want to be able to move easily, particularly if they are
looking to expand rapidly. This may mean that they want lease
terms to be shorter, or have the ability to take on over flow space
at short notice.
16-28 Somerton Drive, Somerton VIC
Sold on behalf of McPhee Developments (part of the McPhee Portfolio)

Adapting to change
Developers need to continue to evolve according to occupier
requirements. In recent years we have seen greater demand for
high bay logistics, increased use of robotics and automation, and a
focus on cubic capacity.
Automation has the potential to change warehouses significantly.
Historically we have relied on forklifts but robotics is now able
to automate a lot of these processes. These changes are likely
to lead to fewer people needed to work in warehousing. In the
same way that labour costs in Australia led to offshoring of
manufacturing, labour costs are leading to greater automation of
many processes within warehouses.
Obsolescence
Charter Hall’s model is to buy, build and hold and as such, we
are placing a greater focus on obsolescence. With the changes
occurring to warehousing and the more complicated requirements
set out by occupiers, this is becoming a greater risk factor.
Tenants increasingly want more flexibility in lease terms which
has the potential to lead to greater movement of tenants.
Globalisation of logistics
The globalisation of logistics is leading to significant change.
A lot of processes are becoming more efficient, the internet
is increasingly used to speed up processes and distribution
centres are dominating industrial property demand. A significant
amount of money is being spent on research and development in
increasing speed to market throughout the supply chain process.
eCommerce
There is an insatiable demand to get products bought online
immediately and in Australia, the travel distances make the cost
of delivering quickly expensive. Those groups that invest in
automation can reduce the cost of delivery and will leave behind
those groups that don’t invest in the delivery process. So far
however we are not seeing much purpose built development for
eCommerce providers. It is still a small component of demand.
eCommerce
Online shopping levels are still low in Australia relative to global
rates. Right now, around seven per cent of total retail sales are
from purchases made online. The rate of growth has also slowed
and we have been sitting at this rate for the past two years. In
comparison, online shopping rates in the UK are more than double
this. We do expect eCommerce to continue to grow however it is
unlikely we will get significant increases in penetration rates until
more Australian consumers are doing weekly shopping online.
A significant amount of shopping online by Australian consumers
is from offshore sites and the strength of the Australian dollar is
a key determinant of shopping volumes. With the weak Australian
dollar, we do not expect a large increase in online shopping
volumes this year.
The main beneficiaries of growth in eCommerce have been 3PL
providers. With most of the purchases coming from overseas
sites, groups like Australia Post, Toll and DHL have seen
increased demand.
Most purchases online from Australian eCommerce sites are
generally being delivered from existing store networks, or if the
store is a pure online retailer, a 3PL group is being used. There
are very few purchases made from online Australian stores that
are coming from specially designed warehouses.
Globalisation of industrial
Australia is a popular destination for offshore capital. Year to date,
around 30 per cent of industrial property by volume has been
purchased directly by offshore groups with the largest transaction
being the sale of the GIC-Frasers Industrial Portfolio to Singapore
group, Ascendas, for $1.073 billion. In addition to this, there are
many offshore groups that are looking to partner with local groups
to tap in their expertise, as well as their land supply pipeline.
Globally, industrial warehouses are becoming more homogenised
and this is part of the driver for more groups looking to acquire
scale by buying globally. Australian group Goodman is now active
in a wide range of markets from North America to Slovakia to
Brazil. The most active global investor in industrial over the
past 12 months has been GIC having purchased more than 500
properties worth more than $US7 billion in the US, UK and India.
We expect that this growth in offshore capital, looking to build
portfolios, will continue.
Malcom Tyson
Managing Director, Industrial
Colliers International
David Harrison
Joint Managing Director
Charter Hall

Metro Office
INDUSTRIAL
We consider there to be four major trends in the industrial
property sector. These are automation, scale, collaboration and
partnering and sustainability.
Automation
There are still only a few groups using high tech retrieval
systems. For most occupiers, the high capital cost will prevent
them from using them. It is likely that mobile automation will have
far quicker take up for smaller occupiers. For example, automated
mobile materials handling units that can operate on any surface,
making them suitable for a variety of warehouse types at a
fraction of the cost.
Sustainability
Frasers have adopted a 5 star GBCA rating standard for our new
facilities, however we are already starting to focus on the possible
benefits of 6 star Green Star in some circumstances.
I see the management and fine tuning of industrial buildings
throughout their operation life as the next step – this practice is
already starting to emerge in some prime commercial buildings.
We see there are two main benefits to a focus on sustainability.
The first is how we can add value to our customers through
initiatives such as power generation and advanced metering, and
the second is an increase in the personal wellbeing of occupants.
Scale
There is a push for larger facilities to be developed with many of
the larger 3PL firms looking at campus type developments and
we are noticing an increase in briefs for facilities in excess of
75,000sqm – such as the one we are currently building for Ceva
in West Park in Melbourne. Internationally this is not unusual, with
warehouses in excess of this size becoming more common in
the main Asian markets. Smaller occupiers are looking at greater
flexibility in their leases. Many of them want the ability to expand
to larger premises as their businesses grow.
Collaboration/partnering
The lack of land supply in some markets, high capital cost of fitting
out a new facility and the increasing complexity of delivering these
projects is driving an increase in collaboration between occupiers
and developer/owners much earlier in the development phase.
This type of partnering relationship allows the occupier to secure
the space required, build in expansion options more readily and
to get an integrated, and in some cases financed, fitout. As the
market increases in sophistication we see this approach becoming
more important.
Changes to warehouses
Distribution centres have historically been a passive property
type. The building shell is still simple however the fit out is
becoming far more complicated as business models continue to
change and evolve. The operation of a centre is now far more
dynamic and automated systems are increasingly being used.
Modern warehouses now have better performing slabs, better
ventilation; they operate 24 hours a day with an environment
that requires good air quality and a constant temperature. Trucks
need to get in and out of the building more efficiently. The outside
design is now determined by the inside fitout.
Although we have seen increased automation, it is unlikely that
there will be a significant impact on employment. This is partly
because business lines that previously may have been located
away from the warehouse, such as procurement and sales, are
increasingly being integrated on site.
eCommerce
Online spending is still low in Australia. By far the majority
comprises bricks and mortar. The main beneficiaries of growth
in online spending have been 3PL firms. It is only when online
retailers establish scale that it becomes worthwhile to operate
entirely on their own. There are no Australian online retailers
that are currently not using a 3PL at some stage of their delivery
process. Overseas, Amazon are large enough to operate their own
warehousing and distribution in some markets and are using 3PL
providers in others.
For this reason the 3PL space is becoming very competitive
and the globalisation in many of these companies is creating
greater efficiencies.
Andrew Whiteside
General Manager
DEXUS Property Group
Reini Otter
Executive General Manager
Commercial & Industrial
Frasers Property Australia

OFFSHORE INVESTMENT NEW ACCOUNTS FOR 60% OF TOTAL VOLUME
Our perspective INDUSTRIAL
MELBOURNE TAKES THE LEAD FOR HIGHEST SUPPLY LEVELS
Sydney BrisbaneMelbourne Perth Adelaide
GIC-Frasers Industrial Portfolio
$1.073 billion to Ascendas
7.2% 7%
SYDNEY
DEC 2007 SEPT 2015
7.3% 7.5%
MELBOURNE
DEC 2007 SEPT 2015
250,694m²273,829m²
SOLD
Domestic
$1.5 billion
$2.7 billion
2012
$1.8 billion
$2.5 billion
2011
Offshore
LARGEST EVER INDUSTRIAL TRANSACTION
PRIME YIELDS HIT PREVIOUS
MARKET PEAK (2007)

AUSTRALIA AND NEW ZEALAND
For more information about Colliers International
and working with us visit:
www.colliers.com.au
SECOND HALF 2015
SYDNEY
32.3% 32.2%
MELBOURNE
36.2%36.7%
ADELAIDE
5.3%5.2%
7.5% 8.1%
BRISBANE
DEC 2007 SEPT 2015
8% 7.3%
ADELAIDE
DEC 2007 SEPT 2015
7.4% 7.4%
PERTH
DEC 2007 SEPT 2015
207,962m² 101,592m² 65,355m²
$4.6 billion
$2.1 billion
2014
$3.4 billion
$0.1 billion
2013 2015
$1 billion
$1.6 billion
MELBOURNE DOMINATES AUSTRALIA’S PORTS (% OF TOTAL TEU’S)
PERTH
9.8% 10.5%
BRISBANE
15.7%16%

The Sydney industrial market is characterised as a sea of capital
bounded by a scarcity of stock. A market fuelled by historically
low interest rates, investors scramble for safe havens to place
capital. Underpinned by strengthening economic conditions, a
limited land supply and a constrained pipeline the weight of capital
has imposed downward pressure on yields. Given the reduction
in global earnings growth, organisations have prioritised multi-
asset purchases in efforts to reduce the acquisition costs and gain
operating efficiencies. In May, Japan Post successfully completed
the $6.5 billion takeover of Toll logistics and, more recently, the
aforementioned $1.073 billion GIC-Frasers Industrial Portfolio
was sold to Ascendas. In 2015, over $1.33 billion Industrial
portfolio sales occurred nationally, comprising of 43 properties.
Of these, the Sydney market accounted for $567 million of sales,
approximately 44 per cent of national sales by value. This trend
is set to continue with Colliers International appointed to sell the
Premium Sydney Industrial Portfolio, Growthpoint Portfolio, and
Charter Hall Portfolios which include eight assets from the Sydney
industrial markets.
March 2015 to September 2015 was a period of exceptional
sales conditions, continuing the momentum emerging in late
2014 and surpassing previous sales volumes. There were $1.66
billion of investment and vacant possession sales recorded
in Sydney industrial market. Limited only by the availability
of stock, sales volumes exceeded the $1.3 billion occurring
between October 2014 and March 2015. Offshore buyers have
becoming increasingly active, representing over $867 million of
acquisitions. The GIC-Frasers Industrial Portfolio purchased by
Singapore’s Ascendas included 12 assets from Sydney valued at
$482.7 million. In June, a new benchmark was set for Australian
industrial property values by the Singapore based Mapletree
Logistics Trust acquisition of Coles Distribution Centre. This deal,
the largest of the year, at Eastern Creek was a 55,000sqm cold
storage facility with a 19.5 year weighted average lease expiry
(WALE) to Coles. It transacted for $253 million at a passing yield
of 5.6 per cent. This offshore demand is expected to persist in
line with the decline of the Australian dollar and the comparatively
higher return yielded by Australian industrial assets.
The limitation of stock compounded by the low cost of capital
has resulted in the downward movement in yields. Yields are
approaching levels similar to those before the letters GFC were
first placed next to each other, however, economic conditions
between these two periods are vastly disparate. There is positive
spread between the all in cost of debt and income yield on
property. Unlike conditions between 2006-2011, where the spread
was negative, current property incomes can counterbalance a
rise in interest rates or any deterioration in leasing conditions.
Furthermore, strengthening economic conditions in NSW are
expected to provide a platform for net effective growth. Vanilla
assets offering size, location, strong covenant and long WALE
remain in high demand. Prime yield have compressed 20 basis
points since March 2015, ending at 7.08 per cent. Moreover the
scarcity of stock has now pushed investors up the risk curve.
Investors have shown a tolerance for vacancies, shorter WALEs
and properties requiring capital expenditure. From March 2015
to September 2015, the average yield for secondary industrial
properties in Sydney market compressed 31 basis points to finish
at 8.25 per cent.
SYDNEY MARKET
Assets sail on tailwinds of growth
Second Half 2015
Research and
Forecast Report
127 Orchard Road, Chester Hill
Sold on behalf of McPhee Developments (part of the McPhee Portfolio)

Metro Office
INDUSTRIAL
SYDNEY INDUSTRIAL YIELDS
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
Sep-05
Feb-06
Jul-06
Dec-06
May-07
Oct-07
Mar-08
Aug-08
Jan-09
Jun-09
Nov-09
Apr-10
Sep-10
Feb-11
Jul-11
Dec-11
May-12
Oct-12
Mar-13
Aug-13
Jan-14
Jun-14
Nov-14
Apr-15
Sep-15
Yiields(%)
Prime Secondary
Source: Colliers Edge
Leasing conditions have been comparatively subdued, facing
headwinds caused by an economy emerging from a sub-trend
period. Additionally, substantial rental growth in Sydney has been
constrained by competitive offers in other markets like Melbourne,
particularly with big box logistics. Notwithstanding this, limitations
in space and a positive business outlook is beginning to drive
rental growth and a reduction in incentives.
The intensity of demand for Sydney based industrial and logistics
assets stems from an underlying confidence in the state economy.
The New South Wales (NSW) economy continues to pace ahead
of the other state and territories. The outperforming growth
rate was driven by a surge in population growth, retail trade
and new home construction. The most recent data released by
the Australian Bureau of Statistics (ABS) indicated the NSW
economy grew by 3.2 per cent in the last financial year, exceeding
the national average of 0.9 per cent. Benefiting from this, the
NSW retail growth in the year to July was five per cent, above
the average growth of 3.4 per cent posted by the other states.
The confidence in the economy was also translated in the labour
market as the unemployment rate in NSW declined steadily this
year, from 6.7 per cent January to 5.9 per cent in August. These
trends are poised to continue as the NSW agricultural, good and
services sectors become more competitive, domestically and
regionally, in line with a fairer value dollar. Furthermore, the 2014-
15 NSW budget delivered a record $2.1 billion surplus. The budget,
moreover, forecasted a surplus of $2.5 billion for the 2015-16
financial year. The budget includes $68.6 billion of spending
on infrastructure over four years. This unprecedented surge in
spending includes the WestConnex, NorthConnex, Badgerys Creek
airport, Moorebank Intermodal and the North West Rail. These
projects will directly support jobs and expansion in associated
businesses and drive future industrial demand.
Sydney West
Yields dig deeper
The Sydney West investment market continues to perform
at record levels. The three tier market prevails, comprised of
institutional grade stock with long WALEs, private investors
and owner-occupiers. Properties with long-lease are king,
with institutional investors paying premium for properties with
long term wales and good quality tenants. Notwithstanding
this, investors have moved up risk curve with sales limited by
the availability of stock. Investors are now demonstrating a
willingness to purchase properties on shorter leases provided
they are readily lettable. However, the limitations in stock are
beginning to emerge, where presently, no properties for sale
or vacant possession between 8,000-12,000sqm are available.
The lower yields achieved are a symptom of limitations in stock.
This shortage was also evident in land sales, where interest
remains unmet by supply. As an indication to the speed of the
market, lower yields and shorter sales periods are being realised
on comparable assets. In August, a property at 12 Birmingham
Road in Villawood sold to a tenant relocating from the Sydney
South market at a yield of 6.45 per cent after only 15 days on the
market. This limitation in stock is expected to encourage further
tightening in the yields and increases in capital value. Yields on
Secondary assets, in particular, will compress further as smaller
syndicators and high net worth move up the risk curve.
SYDNEY PRIME GRADE INDUSTRIAL MARKET
MARKET
AVERAGE NET FACE
RENTS ($/m² pa)
AVERAGE
YIELD
AVERAGE LAND
VALUES ($/m²)
H2
2015
H1
2016
H2
2015
H1
2016
H2
2015
H1
2016
Sydney west $123 6.9% $363 /
Sydney south $168 / 6.4% $1,650
Sydney south west $115 7.1% $290 /
Sydney north $175 / 7% $950
COLLIERS INTERNATIONAL RESEARCH FORECASTS
1A and 1B Raffles Glade, Eastern Creek
(part of the GIC-Frasers Industrial Portfolio)

The Sydney West submarket has been the recipient from owner
occupiers capitalising on the strong sales conditions to sell and
relocate from the South Sydney market. Since August, Colliers
International facilitated three such sales to operators relocating
from the South Sydney market. Speculative purchases continue to
occur in the inner west submarket. Properties in proximity to train
stations, bounding the Parramatta River, or in areas with potential
rezoning are in high demand. Like the outer west and inner west
submarkets, the north west submarket market is stock constrained,
with only four properties currently on the market. However,
industrial assets in this sub-market remain strategically paramount
to logistics networks servicing the north west priority growth areas.
Land values in this market are appreciating as developers seek to
capitalise on this undersupply.
Following the aggressive interest shown of GIC-Frasers Industrial
Portfolio, which sold at a yield of 6.1 per cent and capital value of
$1,700/sqm, attention now turns to Sydney West’s $350+ million
assets encompassed by the JP Morgan, Growth Point and the
Charter Hall portfolios. These portfolios will offer eight logistics
assets from NSW with circa 212,541sqm of building area.
A calm weathered storm
The leasing market has remained subdued with significant uplifts
in rental growth constrained by concerns over a softer domestic
economic economy. Furthermore, competitive offerings from big
box logistics in the Melbourne submarkets restrict any significant
increases in rent. Notwithstanding this, displaced tenants from the
Sydney South and North Sydney market are active in the Sydney
West leasing market.
Prime properties offering clearance and size remain in high
demand. Over the last six months, in excess of 50,000sqm of space
was leased as a result of the recent hailstorms experienced in April.
This comprised of three properties located in Wetherill Park; 3 Davis
Road, 495 Victoria Street and 141 Newton Road.
A two tier leasing market has eventuated in the north west
submarket. Properties offering floorpspace above 5,000sqm are
readily available, with modest signs of rental growth. However,
properties under 2,500sqm are in a state of undersupply, and with
no current proposals in the pipeline. Existing properties in this size
range are experiencing rental growth and a reduction in incentives.
A steady supply of speculative prime floorspace is forecast to come
online over the next 12 months. This includes the developments by
Dexus offering 20,489sqm at Litton Close in Greystanes, Calibre
by Mirvac with approximately 19,000sqm at Eastern Creek, and
14,000sqm by Australand in Wetherill Park, of which 6,000 is
pre-committed.
Given the superior nature of the new generation developments
coming online, leasing conditions, particularly for secondary assets,
will be competitive as landlords seek to secure long WALEs.
Consequently, rental growth in and incentives are expected to
remain steady over the coming year.
Sydney South
An ever intensifying market
Faced with an increasing shortage of sites and high residential
demand, the South Sydney market continued to experience
increase in land values. As a symptom of this increased demand,
at September 2015, the average prime industrial yields in the area
compressed to their lowest point since June 2008, ending at 6.38
per cent. Due to the strength in sales conditions, transactions have
moved off-market as buyers make unsolicited offers to secure a
deal. Currently, there are no investment sales or vacant possession
property above 1,500sqm on the market. Land values have been
moving rapidly upwards since March 2013, growing by +81 per
cent or +$650/sqm, from $850/sqm to an all-time high of $1,550/
sqm in September 2015. On the lowest end, land values in Botany
appreciated to a range between $600-$1,500/sqm whilst, on the
upper end, land values in Alexandria have increased to
$1,800-$2,500/sqm.
Traditionally, owner occupiers have dominated the local industrial
market but with a reducing pool of available stock and the push
from residential developers to acquire industrial properties with
future residential development potential, many smaller occupiers
are being forced to fight aggressively for vacant possession stock or
move out of the area.
This reducing pool of stock coupled with continued steady demand
has driven the demand for well-designed strata units. These
developments have received strong demand from owner occupiers
with buyers concentrating their interests into products that fully
suit their needs. Such features include low office content, suitable
access and circulation and on grade parking. This demand was
evidenced by the performance of the McCauley business park. From
the 30 units offered, 26 have been sold with construction yet
to commence.
4A-4F Huntley Street, Alexandria
Sold on behalf of Bricktop

Metro Office
INDUSTRIAL
• 17 per cent of existing industrial lot area or two million sqm
of land will be lost. This comprises 1.74 million sqm or 14
per cent of the market lost to residential and 0.3 million sqm
or three per cent of the market lost to WestConnex.
Furthermore, City of Sydney Council has progressed with Local
Environmental Plan amendments in Alexandria and Rosebery
at which significant volumes of general and light industrial land
was rezoned to B6 Enterprise Corridor and B7 Business Park.
Consequently, IN1 zoned land is now limited to two streets
in Alexandrea.
The industrial market is expected to experience rental growth
over the next year given tight supply, lack of development
activity and the continual squeeze presented from residential
redevelopment. Prime grade assets will continue to be highly
sought after with tenant covenant and strong WALE being key
value drivers. Incentives are expected to remain stable for prime
quality and secondary grade space but these may well reduce
as tenant demand increases as it becomes a ‘lessor’s market’.
Additionally, prime grade yields are expected to remain firm in
2015 as the lack of prime grade properties for sale remains low,
while the appetite of institutional and overseas investors remains
healthy. Secondary grade yields will possibly tighten as investors
look for value add opportunities.
Sydney South West
The enticing alternative
The Sydney South West market experienced significant growth
in industrial activity following the recently completed upgrades to
the M5 and Hume Highway. The M5 widening provided improved
connections to the South-West with a direct link to the Sydney
Port, Sydney Airport and the Sydney CBD. Moreover, the Hume
Highway works benefited access to Canberra and Melbourne.
The featherweights weigh in
Leasing enquiry above 3,000sqm was reasonable in the first half
of 2015, but subsided towards the latter half of the year. However,
the market demand for space of less than 2,500sqm has been
relatively strong, particularly due to the eroding industrial stock.
Looking forward, the strong sales market and shortage of vacant
possession properties is expected to see leasing demand rise as
owner occupiers give up their search to purchase a property and
sign a lease instead.
Occupiers with operations non reliant on immediate proximity
to the Port or Airport, will elect to move Sydney South West
and Sydney West, where rents and outgoings are comparatively
modest. The Sydney South warehouse users closer to the Sydney
CBD will compete over the limited stock in a tighter market. More
specifically, concrete plant and waste users with operations based
out of Alexandria will be impacted by the limitations in choice.
Vacancy rates have fallen and average prime grade face rents
in the South Sydney market and now range from $150-$180/
sqm net, depending on the level of office content. Secondary
grade space rents are now ranging from $110-$150/sqm net due
to the diversity and condition of stock. Rates in Banksmeadow
and Botany range from $135-$160/sqm for prime property and
$105-$130/sqm for secondary stock. Incentives are anticipated
to decrease with Lessor’s less inclined to offer incentives in the
knowledge that tenant choice is limited, particularly for quality
stock that is under 1,500sqm. Furthermore, rental growth in the
sub-1,500sqm has eventuated in the last six months.
Significant volumes of industrial land from the South Sydney
market is under threat from conversation to residential retail
and other uses. Additionally, industrial land is earmarked for
withdrawal to make way for the WestConnex road project. The
redevelopment of former industrial sites across suburbs such as
Waterloo, Zetland, Alexandria and Botany with residential and/
or mixed use developments has put a further squeeze on the
availability of industrial stock. This trend is likely to continue in the
future as market conditions dictate the highest and best use value
of existing industrial sites.
As part of the WestConnex project a new interchange will be
delivered at St Peters to connect to the Airport. The St Peters
Interchange will be located in the industrial area bounded by
Canal Road, Burrows Road, Campbell Road and Princes Highway.
Taking into account the cumulative impact of the loss of industrial
floorspace and land to residential and infrastructure uses, a
recent study undertaken by Colliers International determined that:
• Twenty-one per cent of existing industrial floorspace in
South Sydney will be lost, equivalent to 1.5 million sqm
of floorspace. Residential uses will see 19 per cent of the
market or 1.4 million sqm removed whilst WestConnex will
see the loss of two per cent of 0.1 million sqm; and
141-145 Newton Road, Wetherill Park
Leased on behalf of Trimix Investments Pty Ltd

The Sydney South West offers a strong value proposition, as
the market continues to receive displaced operators from the
Sydney South market. Modern high clearance properties such
as 90 Ashford Avenue in Milpera, sold to a private from the
Sydney South at $10 million. In this instance the larger land
component provided an enticing alternative for an owner faced
with increasing capital values. The revitalisation of Liverpool
CBD, development and operation of the Moorebank Intermodal,
and proximity to the proposed second airport at Badgerys Creek
have prompted an increase in speculative acquisitions. In the
six months to September, over $51 million worth of acquisitions
occurred with an anticipation of re-zoning to residential.
Prime properties with high WALE demonstrate a superior
appeal. However, akin to the wider Sydney Industrial market,
sales stock has been thin. As the competition for limited stock
intensifies, shaper secondary yields are beginning to emerge. In
June, an asset at 373 Horsley Road in Milperra boasting a nine
year WALE transacted at a sharp yield of 6.77 per cent after
receiving 22 offers at the end of the EOI campaign. Competition
amongst domestic and offshore groups for secure, high-quality
industrial assets met with a lack of stock has led to further yield
compression. At September 2015, the yield range for prime assets
was 6.5-7.5 per cent and eight to nine per cent for
secondary assets.
Also experiencing elevated demand, ready-to-develop land,
particularly less than one hectare, has received increased
demand from both owner occupiers and developers with a
pre-commitment in mind. Since March 2015, in excess of
$114.5 million worth of vacant land sales were made in the
Sydney South West market. The diminishing stock and increased
demand pushed up average land price in the market to $450/sqm
at September 2015.
The evolving market
Tenant enquiry, albeit somewhat subdued, has demonstrated a
gradual improvement compared to previous periods. Furthermore,
lead times between enquiry and leases being signed has
shortened in the past 12 months. The persistent demand for high-
quality space and reduced availability has led to an increase rents
for prime grade assets, by as much as 3.5 per cent over the past
six months. The highest rental growth has been seen in recently
completed, speculatively built facilities, which have received strong
demand and are now almost fully leased.
The industrial stock above 10,000sqm available for lease in
South-west Sydney has tightened substantially in the previous
12 months. In the central region, surrounded by the intermodal
terminal, the availability of stock is expected to further tighten in
the lead up to opening of the intermodal terminal, forecasted for
mid-2018. Notwithstanding this, properties circa 1,200sqm have
received the greatest enquiry, as smaller size tenancies remain
highly sought after.
In the period between March-September 2015, over 108,312sqm of
industrial floorspace was leased at an average rate of $99.7/sqm
net. The average rent range for prime assets was $100-$130/sqm
net and $75-$95/sqm for secondary assets. Benign renal growth
is expected in the coming 12 months as a healthy development
pipeline of stock will be met by strong demand. Colliers
International forecasts strong absorption from third-party logistics,
transport, food, pharmaceutical and cold storage companies.
A major project that will occur in Sydney will be Qube’s Moorebank
Intermodal Freight Precinct. The project, Australia’s largest
intermodal freight precinct, is expected to include a subdivision
plan for up to 850,000sqm over 240 hectares of land. The precinct
is expected to accommodate the extra capacity from a new terminal
at Port Botany, to be open in 2017. Furthermore, its aims to nearly
double the freight carried by train to 28 per cent. The prime
industrial land will be in the heart of the Sydney South Western
growth corridor and in close to the entry points for the
M5 and M7. The project is expected galvanise industrial activity
South West through significant infrastructure expenditure and
boost to employment.
Sydney North
A scarce story
The Sydney North industrial market remains extremely tight. The
lack of stock has resulted in upward movements in capital values.
The six months to September 2015 has been a solid period in
sales, with over $130 million transacting. In this period, the sales
achieved an exceptional average capital value of $2,469/sqm.
Yields have continued to decline to an average 7.5 per cent for
prime and 8.75 per cent for secondary grade assets. Despite the
strength of the prevailing market, some owner occupiers remain
cautious of selling their property, and subsequently re-entering
an ever tightening market. However, others have chosen to
downsize and retain management operations in the North Shore
5-9 Bridges Road, Moorebank
Sold on behalf of Joyce Corporations

Metro Office
INDUSTRIAL
market, whilst relocating the manufacturing and storage facilities
to low cost markets in the west. Notwithstanding this, sale and
leasebacks remain popular as current conditions have enticed
owner occupiers to sell and re-capitalise their business.
Similar to the other market, the stock limitations have pushed
investors up the risk curve. Speculative acquisitions continue
to occur, as investors have shown a willingness to purchase
on potential rezoning. More recently, the announcement of the
Northern beaches hospital project earmarked for Frenches Forest
has led to a flurry of speculative purchases seeking a potential
rezoning uplift. Secondary stock has also received heavy interest
from childcare operators looking to convert existing stock. In
particular demand, assets with floorspace between 1,000-
1,500sqm on lots with the potential to facilitate a playground are
considered ideal to accommodate approximately 100 children.
Size matters
Leasing demand in the Sydney North is showing a recovery, as
the limitation in stock has allowed landowners to push back on
incentives. The market is dominated by smaller tenancies, with
only two options above 4,000sqm available for lease. Enquiries
remain focused on tenancies between 500-1,500sqm, which
reflects the nature of demand from the market. Accordingly, in the
over the six months to September 2015, 75 per cent of the leases
signed were within this size range.
With no vacancies above 10,000sqm, larger uses will bypass the
market and service the area from the Sydney West market. Given
the demand from higher value residential, retail and bulky goods
uses, it is unlikely any new industrial properties will come online
in the near term.
The tightening of the market has discouraged the propensity to
offer generous incentives. Average incentives have fallen to 13
per cent for Prime grade properties and 10 per cent of secondary
grade assets. Average prime grade face rents in the market
currently range from $130-$220/sqm net, whilst Secondary grade
space rents are now ranging from $100-$150/sqm net.
Looking forward
The upward momentum in capital values is expected to continue
into coming 12 months as the erosion of stock and competition for
the limited properties eventuates. Yields, particularly in the sub-$15
million, will further tighten as a result for competition amongst
private and syndicate purchases. Secondary assets are forecast
to compress with investors moving up risk curve combined with
sustained demand from speculative purchasers.
The tightening of the market will persist with the limited
development pipeline and further withdrawal of stock. Tenants
seeking lower cost solutions will be pushed into north west
and inner west sub-markets. Upon completion of the $3 billion
NorthConnex road tunnelling project, scheduled for early 2019,
newer development are expected to come online in beneficiary
areas such as Mount Kuring-Gai. In the interim, leasing conditions in
the Sydney North submarket are expected to favour landlords, with
lower incentives and steady rental growth.
SYDNEY INDUSTRIAL LEASING INDICATORS
0%
2%
4%
6%
8%
10%
12%
14%
16%
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
Prime Secondary Prime Secondary Prime Secondary Prime Secondary Prime Secondary Prime Secondary Prime Secondary
North North West South South West Inner West Central West Outer West
Net Face Rent Gross Incentive
NetRent($/sqm)
GrossIncentive(%)
SYDNEY INDUSTRIAL MARKET AVERAGE YIELDS
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Sep-04
Mar-05
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Sep-10
Mar-11
Sep-11
Mar-12
Sep-12
Mar-13
Sep-13
Mar-14
Sep-14
Mar-15
Sep-15
Yield/Rate/Spread
Spread to Bonds Prime Grade 10-Year Govt Bond Rate
Source: Colliers Edge / RBA
373 Horsley Road, Milperra
Sold on behalf of GDI Property Group
For further information please contact:
Sas Liyanage
Research Analyst | Research | Tel +61 2 9249 2039
sas.liyanage@colliers.com

MELBOURNE MARKET
Second Half 2015
Research and
Forecast Report
The end of the resources boom in Australia began as a slow shift
around 2014, and is now in full swing, evidenced by the dive in
the value of the once all conquering Australian dollar. While the
mining focussed states of Western Australia and Queensland
will need to find new areas of economic activity to fill the void,
Victoria is one state that will benefit from both the lower value
of the Australian dollar, as well as historically low interest rates.
Merchandise exports from Victoria took a deep dive in 2009-
2010 as the dollar strengthened and our goods were seen
as comparatively expensive on world markets. More recently
however, our dollar is now helping manufacturers, and Victorian
merchandise exports are rising as a result. After somewhat of a
hiatus, the manufacturing sector in Victoria is slowly starting to
re-emerge as a genuine demand sector again.
AUD/USD EXCHANGE RATE AND VICTORIAN
MERCHANDISE EXPORTS
-30%
-20%
-10%
0%
10%
20%
30%-30%
-20%
-10%
0%
10%
20%
30%
Jun-2000
Jun-2001
Jun-2002
Jun-2003
Jun-2004
Jun-2005
Jun-2006
Jun-2007
Jun-2008
Jun-2009
Jun-2010
Jun-2011
Jun-2012
Jun-2013
Jun-2014
Jun-2015
Victorian Merchandise Exports AUD/USD (RHS)
The Port of Melbourne is a major driver of demand for industrial
land in Melbourne, particularly from the transport and logistics
sector. Monthly trade through the Port of Melbourne is now
consistently higher than 200,000 Twenty-foot Equivalent Units
(TEUs), and in the 2015 financial year, 2.58 million TEUs passed
through the port. The Port of Melbourne maintains its ranking
as the busiest port in Australia, despite servicing the 2nd largest
city in Australia. Melbourne’s attractive land values, which are on
average 43 per cent cheaper than land values in Sydney play a
key role in maintaining Melbourne’s reputation as logistics capital
of Australia.
According to the Victorian State Government’s Urban
Development Program, just over 200 hectares of vacant industrial
land was taken up in the 2014 financial year, which is broadly
in line with the average annual post-GFC take up rate of 190
hectares per annum. Almost half of this land was taken up in
Melbourne’s West industrial precinct, where, where average
land values are $160/sqm, 37 per cent cheaper than the average
industrial land value in Melbourne’s outer industrial markets.
Housing construction is also a strong supporter of industrial
demand, and retail turnover growth in household goods in Victoria
has been growing at double digit levels since October 2014. The
strong housing sector supports demand in both Transport and
Logistics and Retail and Wholesale Trade categories, and indeed,
these two tenant categories have accounted for 72.5 per cent of
industrial leases signed in 2015 year to date.
Demand drivers for Melbourne still strong
Lot 7A, 207 Sunshine Road, Tottenham
Sold on behalf of Olex Australia Pty Ltd (Nexans Olex)

Metro Office
INDUSTRIAL
7 Grace Court, Sunshine West
Sold on behalf of Rowe Property Investments Pty Ltd
VICTORIA HOUSEHOLD GOODS RETAIL TURNOVER
-10%
-5%
0%
5%
10%
15%
20%
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
y-o-y%change
Investors are continuing to see these positive upsides to
both Melbourne and Australia’s positive industrial demand
fundamentals. Colliers International were conjunctionally
appointed to sell the 26 asset GIC Australian Logistics Portfolio,
and have successfully concluded what is now the biggest
ever industrial sale in Australian history. The portfolio sold to
Singapore-based Ascendas for $1.073 billion, and reflected
a blended yield of 6.1 per cent. Demand for the portfolio was
extraordinary, with 15 bidders in total vying for the assets.
Highlighting the strong regard that the Australian market is
currently seen in on global markets, the top five bidders (by value)
were all offshore groups. The nine Melbourne assets sold for a
total of $336.5 million, at a blended yield of 6.1 per cent.
City fringe
Residential developers constricting supply
The Port Melbourne precinct continues to be characterised by a
major change in usage - that is, from a predominately industrial
area to one now highly sought after by residential developers.
Many longstanding tenants in the area, particularly those in
the automotive-related industry, as well as panel beaters and
service garages, are finding their leases will not be renewed as
the site is now worth more as a residential development. Finding
any smaller warehouses in adjoining suburbs such as South
Melbourne and Southbank, is also proving increasingly difficult for
the same reason, and most of these tenants are now being forced
to look outside of the city fringe to find appropriate space.
The industrial-zoned area of Port Melbourne continues to
remain attractive to high-tech users, and the research and
development industry. Lack of public transport, but good access
to Melbourne’s freeway system, means the strata/hi tech suites
are also attractive to those organisations that have a high
proportion of travelling sales staff. Prime Grade net face rents
in the employment precinct now range from $160 to $180/sqm
per annum. Land values in this precinct range between $750 and
$900/sqm. In comparison, land in the Capital City zoned Wirraway
precinct will fetch an average of $1,375/sqm. The Sandridge
precinct land values average $3,000/sqm, while Montague is
attracting developers paying $5,500/sqm and above.
The major industrial site sale pending in Port Melbourne is GMH’s
37.7 hectares Port site at 241 Salmon Street. The site consists of
five parcels bordered by Salmon St, Todd Rd, Lorimer St and Cook
St and accounts for 30 per cent of industrial land available in
Port Melbourne.
North
Infrastructure upgrades improving access to
the airport
Two major sales in the north have transacted in the Tullamarine
and Westmeadows precincts, with both sites having high
visibility to the Tullamarine Freeway and all through traffic to
Melbourne Airport. Colliers International sold 31-69 Western
Avenue on behalf of Fairfax Media Limited. The property is a
59,750sqm parcel of land home to 24,090sqm of improved
facility of the highest quality, featuring significant infrastructure
for manufacturing processes and data management. The facility
itself – with quality, modern improvements and significant power
supply – covered only 40 per cent of the site, leaving plenty of
land for further development (STCA). The site was purchased for
$16 million by Bobby Zagame, Managing Director of the Zagame

infrastructure enhancements announced include the widening
of 23.8 kilometres of the CityLink Tullamarine corridor, running
from the CityLink tunnels to Melbourne Airport. This upgrade will
greatly improve road access from Melbourne, particularly the port
precinct, to Melbourne’s north.
NATIONAL PORT CONTAINER MOVEMENTS
-
50,000
100,000
150,000
200,000
250,000
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
MonthlyTEUs
SYDNEY MELBOURNE BRISBANE PERTH ADELAIDE
Source: Colliers Edge, NSW Ports, Port of Melbourne Corporation, Port of Brisbane,
Flinders Ports, Fremantle Ports
West
Dairy industry a key new player in the market
The west industrial market continues to be the dominant
industrial market in Melbourne. Demand from both tenant and
owner occupiers continues to be strong, as port container
Group. The second major transaction was Warrington Property’s
purchase of DEXUS Wholesale Property Fund’s Melbourne
International Airfreight Centre for $23.85 million in June 2015.
The deal was transacted off-market and the sale price reflected
an initial yield of 6.03 per cent. While the deal was sharp, the
5.6 hectare site was 31 per cent vacant at the time of sale.
The Transport and Logistics sector continues demand space in
the North, and users are now competing for a dwindling supply
of vacant stock over 5,000sqm. Net face rents for Prime Grade
facilities have stayed steady over the past six months, averaging
$78/sqm per annum.
Melbourne Market, Victoria’s new wholesale fruit and vegetable
and cut flower trading centre, opened on a new 60 hectare site at
Produce Drive, off Cooper Street in Epping. Partly as a result of
increased demand from owner occupiers who wish to be near the
markets, land values for 3,000sqm serviced lots in the north have
increased from an average of $238/sqm in March 2015, to an
average of circa $250/sqm in September 2015. At the upper end
of the spectrum, lots are transacting for $270/sqm.
Infrastructure improvements are also adding to the attractiveness
of the north and west precincts for logistics and transport users.
A new $100 million road linking Melbourne Airport directly to the
Western Ring Road opened in June 2015. The 3.3 kilometre road,
known as Airport Drive, will save significant time for passengers
and freight travelling from the west of Melbourne. Further
Warehouse A, 162 Australis Dive, Derrimut (part of the GIC-Frasers Industrial Portfolio)

Metro Office
INDUSTRIAL
movements through the Port of Melbourne remain the highest
of all ports in the country, and new housing construction sees
growth in household goods retail turnover at its highest levels
in recent history. As housing construction continues, the need
to warehouse and manage household goods that consumers
purchase to furnish these new houses continues to drive
industrial demand.
One of the industries in Australia that has outperformed over the
past year has been the agriculture industry. The west industrial
market is experiencing a new wave of demand from this sector,
as Asian consumers – particularly Chinese consumers – continue
to demand our high quality and very safe agricultural produce.
Demand for milk powder from China has significantly impacted
demand for warehousing and storage space in the West, and there
are a number of deals in motion that should highlight this trend
over the upcoming months.
Reasonable supply levels in the west industrial market remain in
place. In 2015, just over 100,000sqm of stock is expected to reach
practical completion, the highest levels since 2011. Still, these
supply levels are some way off the peak supply periods between
2007 and 2010.
Face rents have remained stable now for over five quarters,
ranging between $70 and $80 for prime grade space as at
September 2015. Well priced prime grade stock is driving demand
from tenants who currently occupy secondary grade buildings in
the north and west precinct, particularly around Campbellfield, to
enquire on prime grade, more efficient buildings in Derrimut.
In terms of vacancy, the west currently has in excess of
500,000sqm of space available across 59 facilities. However,
this availability is heavily concentrated in the sub-15,000sqm size
range, and there is a noticeable shortage of stock above
15,000sqm.
Owner occupiers, however, continue to drive enquiry in our north
west industrial office. Transport occupiers are still very active, and
many have requirements for heavy duty hardstand and loading
docks sub 5,000sqm.
The investment market continues to go from strength to strength,
as a multitude of buyer types search for prime grade facilities to
purchase with strong tenant covenants and reasonable WALEs.
Prime Grade yields have contracted from an average of 7.3
per cent in March 2015, to seven per cent in September 2015.
Seven of the 26 assets sold as part of the GIC-Frasers Industrial
Portfolio were located in Melbourne’s West precinct, in Altona,
Altona North, Truganina and Derrimut. Year to date, just over
$400 million worth of investment sales had transacted in the
West precinct.
MELBOURNE INDUSTRIAL AVERAGE PRIME GRADE YIELDS
6.50%
7.00%
7.50%
8.00%
8.50%
9.00%
Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
City Fringe North South East West Outer East
Warehouse A and B, 24 William Angliss Drive Laverton North
Leased on behalf of Goodman

Anneke Thompson
Associate Director | Research | Tel +61 3 9940 7241
anneke.thompson@colliers.com
14 Ordish Road, Dandenong (part of the GIC-Frasers Industrial Portfolio)
South & outer east
Land supply in the south east industrial market is being rapidly
consumed by local developers and owner occupiers, causing an
upwards shift in the average price. An average 3,000sqm lot now
retails for $280/sqm, up from $250/sqm in September 2014.
Places Victoria’s Dandenong LOGIS, a 154 hectare eco-industrial
business park, is already sold out, with other parks, such as
Frasers Property’s The Key, Pellicano’s Innovation Park and
Goodman’s Power Park all selling down retail lots of a rapid rate.
At the larger end of the deal spectrum, the logistics sector
continues to drive the market. Many logistics and transport
users are taking advantage of current market conditions and
consolidating smaller facilities into bigger, newer and more
efficient buildings. Activity is even more pronounced now, as the
speculative building of facilities over 10,000sqm in the south east
has all but stopped, and supply in this space is also dwindling.
In the past six months, three buildings over 10,000sqm that had
been on the market for up to eighteen months have now been
taken up. As a result of the reduction in supply of larger facilities,
the pre-lease market is also ramping up with pre-commitments
over 10,000sqm being completed by Miele, Cyclone and
AstralPool.
One of the outcomes of the reduction in speculative supply of
larger buildings could be a moderating of incentives. Incentives for
prime grade facilities in the south east currently range between
15 per cent and 25 per cent, but we expect these to cool slightly
by the middle of 2016, as supply of large scale facilities starts to
approach critical levels.
Investment sales deals in the South East has been led by two
of the assets that formed part of the GIC-Frasers Industrial
Portfolio sale – 14 Ordish Road and 35-61 South Park Drive, both
in Dandenong South. As a result of this deal, plus yield evidence
gained across a further $115 million worth of investment sales
transactions, yields have compressed from 7.38 per cent at the
start of the year, to an average of 6.88 per cent for prime grade
facilities as at September 2015.
In the inner east, the biggest trend is the development and strong
sales and leasing activity of high quality strata developments in
suburbs such as Mt Waverley, Knoxfield and Oakleigh. Due to
better infrastructure and transport access, large logistics and
transport users are moving to locations in the south east, and
their vacated brownfield sites are being redeveloped into high
quality master planned estates such as Spectrum Business
Park and Industria Oakleigh. Owner occupiers continue to be
the dominant purchaser type for established facilities, with low
interest rates and scarcity of facilities to lease driving this trend.
Due to the growth in higher quality industrial stock in the area,
face rents are remaining firm at an average of $85/sqm per
annum for prime grade stock, while a relative scarcity of stock
have held average incentives steady at 13 per cent for the past
two years.
MELBOURNE INDUSTRIAL LAND VALUES*
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
City Fringe North South East West Outer East
$/sqm
Sep-14 Mar-15 Sep-15
*Retail lots average 3,000sqm

Metro Office
INDUSTRIAL
All Brisbane industrial markets are experiencing strong demand
from domestic and international investors for investment grade
industrial assets. This is continuing to have a tightening effect on
prime and secondary yields. Appetite predominantly persists for
prime assets that have long term WALEs with strong covenants in
prominent locations. However, due to the scarcity of opportunity,
increased investment activity is ensuing for products that either
have vacant possession or those that offer short term lease
expiry profiles.
During the first half of 2015, institutions dominated the investment
landscape, accounting for $266.2 million of the total $359.5 million
in transaction volume. The ATC recorded the greatest sales volume
by value with around $140 million transacting across seven
industrial properties. Portfolio sales have been a buoyant sector as
vendors have sought to capitalise on strong investment demand,
with the, ACFS, Altis, Super Retail Group, Inghams, McPhee, Valad
and Scheinberg industrial portfolios changing hands over the
12 month period. Over the course of the year, portfolio sales are
expected to remain a prominent element driving investment activity.
Singaporean institutional REITs were active over the period. Cache
Logistics Trust made its first Australian acquisition in February
2015 outlaying nearly $75 million on the McPhee portfolio.
Portfolio sales are becoming an increasing feature among offshore
groups gaining a foothold into Australia’s property market. Risk
diversification is achieved by investment made into a range of
property asset classes, with enhanced geographical exposure and
the realisation of economies of scale. Mergers and acquisitions
were also a characteristic, with Frasers Centrepoint acquiring the
Australand’s portfolio worth over $1 billion in industrial property.
Prime industrial grade assets continue to represent stable and
strong investment opportunities. Compared to Sydney and
Melbourne, yields in Brisbane are softer by 50 to 100 basis points.
As the intrinsic investment risk is not necessarily reflective of
this yield differential, starved investors and the impact of weight
of capital chasing prime assets is expected to drive further yield
compression in Brisbane. Yields are expected to follow suit to
Sydney and Melbourne.
The push for scale combined with the strong investment market
is leading to increases in the supply pipeline. Supply has gradually
been increasing with institutional REITs Goodman, DEXUS and
Australand driving supply in Brisbane with nearly 70,000sqm of
supply due to be speculatively constructed in 2015 across several
large industrial estates.
Consolidation has been a key theme in the market. Business
operators have been undertaking below-line cost measures to
improve their overall operational efficiencies focusing on smoothing
out logistics, supply chains, inventory management and the cost
of labour. Administration functions are also being centralised and
these factors have been driving the appeal of large format, high
quality industrial facilities. As Brisbane’s major industrial areas are
well-serviced by the transport and arterial network, businesses
are now looking beyond this factor and considering blue collar
employment pools as part of their location decisions to draw on a
larger local workforce.
BRISBANE MARKET
Investor appetite continues unabated
Second Half 2015
Research and
Forecast Report
165 South Pine Road, Brendale
Sold on behalf of Solingen Pty Ltd

Throughout the first half of 2015, leasing volumes in the Brisbane
industrial market plateaued and were underpinned by the execution
of large space requirements by Lindsay Australia, OI Glass and
Tyres4U. The leasing market softened during the first half of 2015
with approximately 123,500sqm of floorspace leased (tenancies
over 2,000sqm), a halving from the preceding six months. This in
part has been a reflection of the limited supply of A Grade and to
a lesser extent B Grade product and also to the marked decline in
tenancy sizes sought. Tenant demand was most prolific in premises
of up to 2,000sqm, down from the previous six month average.
Leasing activity was dominated by logistics based industries
representing a significant share of the total leasing volume
(40.6 per cent).
Although vacancy is generally low, the dampened leasing market
coupled with the development supply pipeline will hamper rental
growth in the short term, with isolated increases in incentives
continuing. Despite the softened conditions, tenant demand is
expected to improve in the medium term as confidence continues
to build following a stabilised interest rate environment and
recalibration of the Australian dollar. Positive growth in retail
spending together with the completion of the Legacy Way Tunnel
and ongoing construction of the Gateway North Upgrade will also
support the industrial market fundamentals.
Australia TradeCoast
Logistics dominate leasing activity
Leasing activity in the Australia TradeCoast (ATC) - includes the
north-side suburbs of Eagle Farm and Pinkenba and south-
side suburbs of Morningside, Colmslie, Queensport, Murrarie,
Hemmant, Lytton and Fisherman Islands - has remained stable
across 2015 led by transport and logistics operators. Direct
access to the airport, The Port of Brisbane, Gateway Motorway
and CBD represent key elements drawing businesses to the
precinct. Queensland Rail were among businesses expanding into
this precinct, executing a lease across 7,900sqm at Hendra on a
five year initial lease term.
285 Lavarack Avenue, Pinkenba
Sold on behalf of OneSteel
Logistics operators, Silk Logistics and Yusen, also pre-committed
to warehouse space of 30,960sqm and 8,950sqm respectively
in Goodman’s Lytton Motorway Estate which was completed in
second quarter of 2015. The total 39,910sqm of speculative space
in the estate was fully committed prior to development completion.
This demonstrates strong demand for quality warehouse facilities
that have access to key transport infrastructure. Transport and
logistics operators, in particular, will continue to generate demand
for industrial space in the ATC, as the precinct is well-positioned
to cater for retrieval and handling activities for import and export
air and ocean freight.
COMPOSITION OF LEASING ACTIVITY
40.6%
28.4%
2.7%
4.7%
23.6% Logistics
Machinery/Auto
Manufacturing
Services/Other
Wholesale/Retail
Note: Figures represent market averages as at end of Q1 2015. For more details see
the Data Tables.
BRISBANE PRIME GRADE INDUSTRIAL MARKET INDICATORS
REGION
AVERAGE NET
FACE ($/m² pa)
AVERAGE
YIELD
AVERAGE LAND
VALUES ($/m²)
H1
2015
H2
2015
H1
2015
H2
2015
H1
2015
H2
2015
Australia
TradeCoast
$115 7.6% $275
North $110 7.8% $238
South $103 7.9% $225
South west $103 7.9% $225
Yatala $103 7.9% $200
COLLIERS INTERNATIONAL RESEARCH FORECASTS

Metro Office
INDUSTRIAL
North
Appeal towards larger scale
A defining market feature has been the appeal of larger format,
high quality industrial facilities located in sought after transport
node locations. The north precinct (includes the suburbs of Hendra,
Northgate, Banyo, Virginia, Geebung, Zillmere, Brendale, Strathpine,
Lawnton, North Lakes, Narangba, Deception Bay, Burpengary, Kippa
Ring and Clontarf) is transitioning from manufacturing and service
oriented industries to more storage and warehousing facilities, as
reflected by the area’s attraction of large format warehouse and
distribution centres. Aldi is the latest retail giant to locate in the area
and is developing a 49,000sqm distribution facility on a 17.1 hectares
site in Brendale, due for completion in the second half of 2015. The
distribution centre will support its retail stores in greater Brisbane
including those north of Brisbane.
Repositioning assets becomes key
Major owners of large format estates within the inner north, such as
Goodman, Charter Hall and Stockland, are combating site availability
in the outer north by refurbishing and repositioning existing assets
within the Traditional North precinct to provide occupiers with more
functional facilities without commanding the premium rentals required
by new development sites.
Charter Hall have invested heavily in their asset at 180 Holt Street,
Pinkenba, with a substantial refurbishment helping to secure
AP Eagers on a long term lease commitment across 8,000sqm.
Stockland are also in the final stages of completing a refurbishment
of Kmart’s ex distribution centre at Hendra, with a reconfiguration of
the dock access and substantial façade works leading to 30,000sqm
being taken up by Kmart and Bevchain. Goodman are planning
a refurbishment of a 16,000sqm tenancy previously occupied by
Yusen Logistics at 370 Nudgee Road, Hendra which will add to the
considerable repositioning spend undertaken on these assets during
2013-2015.
Institutional investors active
Investor appetite for ATC assets is showing no signs of abating.
Yield tightening was evidenced through a number of asset sales.
Institutional investors are primarily attracted to prime assets with
strong lease covenants in place. There is virtually no supply of
prime grade investments being offered to the open market within
this precinct outside of assets included in a major portfolio sale
being undertaken by Charter Hall. Demand however remains
particularly buoyant in this sector and it is expected the weight
of capital, both onshore and offshore, will continue to focus
on new logistics facilities and retail warehouses in strategic
logistics precincts such as the ATC. Demand for these properties
will continue to be supported by tenant needs to relocate and
consolidate to improve efficiencies.
As investment opportunities are relatively constrained with the
REITs building speculative stock and holding on to these assets,
other investors are moving up the risk curve and investing in
more complicated assets. Altis Property Partners’ purchased a
leasehold interest on Fisherman Island at the Port of Brisbane
as part of the ACFS portfolio which was completed in the third
quarter of 2015. Given the leasehold structure underlying the
asset, it is expected to achieve a softer yield of 7.5 per cent.
Further cap rate compression in the ATC is anticipated as
investment appetite continues.
Properties in the Australia TradeCoast continue to remain tightly
held with well-located assets providing strong underlying leasing
fundamentals being particularly sought after. 285 Lavarack
Avenue, Pinkenba traded in May 2015 for $14.5 million with a one
year sale and leaseback to OneSteel representing a yield of nine
per cent. 92-116 Holt Street, Pinkenba was also subsequently sold
for $16.4 million on a yield of just over eight percent with just over
two years remaining on the lease to BlueScope Steel.
62 Sandstone Place, Parkinson
(part of the GIC-Frasers Industrial Portfolio)

Investment grade opportunities within this precinct are sought
after, highlighted by, Altis Property’s acquisition of a 5,500sqm
property at 165 South Pine Road, Brendale for $16.2 million at a
yield of around 7.75 per cent when allowing for the development site
component. This asset was sold on a 10 year sale and leaseback to
The Crest Group, which will underpin a showroom and warehousing
development with an expected end value of $50 million.
Analogous to the leasing fundamentals, acquisition opportunities will
be limited by the lack of stock in the north’s development pipeline.
BRISBANE INDUSTRIAL INVESTOR BY PURCHASER TYPE
0
0.2
0.4
0.6
0.8
1
2010 2011 2012 2013 2014 YTD 2015
Domestic Offshore
South
Strong lease covenants and long WALEs
drive investment
Investment activity in the south (encompassing the suburbs
of Acacia Ridge, Salisbury, Rocklea, Coopers Plains, Larapinta,
Berrinba, Heathwood, Parkinson and Browns Plains) was dynamic
in the first half of 2015. Investment opportunities between $5 and
92-116 Holt Street, Pinkenba
Sold on behalf of The GPT Group
$10 million were pursued, accessible to many groups, including
REITs, investment managers and private investors who were
all active buyers. Industrial investment in the area has been
underpinned by substantial portfolio sales including the McPhee
Portfolio and GIC-Frasers Industrial Portfolio trading which included
assets such as Ceva’s 40,000sqm distribution centre at Berrinba.
Development sites in demand
Institutional demand continues with pace to secure long term
development sites located within core logistics locations. Key
examples of this trend include GPT’s acquisition of 20 hectares at
South West 2 at Berrinba, Dexus’s acquisition of 4.8 hectares at
Larapinta and Logos’s rumoured purchase of 24 hectares of the
long-time mooted Heathwood Logistics Park. This development
activity highlights the strong investment demand for quality assets
in this precinct, and with a lack of readily available investment
opportunities being offered to the market it is anticipated that this
development activity will continue with pace.
Mixed leasing demand
Leasing demand has been mixed in the south with leases signed for
a range of business uses and tenancy sizes. Beaumont Tiles signed
the largest lease, pre-committing to a 13,164sqm warehouse on a
12 year term in Goodman’s new Rochedale Motorway Estate, which
is scheduled for completion in the first quarter of 2016. Beaumont
Tiles will be the first tenant in the new estate. Lindsay Australia
also signed a precommittment for 12,000sqm of high quality
warehousing on 4.67 hectares of land at Postle Street, Acacia
Ridge which should be delivered in the first half of 2016. There
were a handful of smaller leases signed among the wholesale and
retail, transport and logistics and manufacturing based operators
including Tyres4U (10,500sqm), Medline (4,100sqm), AGCO
Corporation (3,311sqm) and Ruralco (8,000sqm). As developers
compete to secure suitable tenants into speculative stock, prime
grade net rents in the south are expected to remain stable and
average between $95-$115/sqm while secondary grade net rents
average between $70-$85/sqm.
South West
Investment options constrained
Properties are tightly held in the south-west precinct (comprises
the suburbs of Darra, Wacol, Richlands, Redbank, Carole Park and
Ipswich). Investors have been active within the sector, attracted by
strong links to major inter and intrastate transport infrastructure.
This is highlighted by Cache REIT’s reported purchase of 203 Viking
Drive, Wacol in September 2015 for $27 million, representing a
passing yield of just over seven per cent.

Metro Office
INDUSTRIAL
Larger and stronger
During the first half of 2015, major transport and logistics
operators Northline and TNT Express moved into their new
purpose-built premises in Goodman’s Redbank Motorway Estate,
joining DB Schenker. Northline, occupying 12,485sqm of space,
located from its former Pinkenba facility while TNT had requisite
for a 30,000sqm custom-designed facility. Corresponding to the
theme of consolidation, relocations have enabled these tenants to
improve operational and client efficiencies through better access
provisions to major transport links, consequently broadening
access to supply chain partners. Other benefits, including
reduction in freight turnaround times have also been reported
for select tenants who move the majority of their product via
interstate road networks. As competition amongst the REITs to
lease property ensues, net rents have softened with prime grade
rents ranging between $95-$110/sqm and secondary grade rents
ranging between $70-$90/sqm in the precinct.
BRISBANE INDUSTRIAL PRIME GRADE –
AVERAGE NET FACE RENTS
112.5
107.5
100 100
92.5
0
20
40
60
80
100
120
140
ATC North South South West Yatala
($persqmpa)
Sep-14 Mar-15 Sep-15
Peter Willington
Manager | Research
peter.willington@colliers.com
Yatala
Enterprise Area
Leasing activity muted
The Yatala Enterprise Area (including Yatala, Stapylton and
Ormeau) has experienced a wave of activity compared to subdued
demand post-GFC, which saw little major construction activity
across the period 2009-2014. This precinct has always enjoyed
the benefit of a central location along the south-east Queensland
growth corridor, being situated halfway between Brisbane and
the Gold Coast, and leasing demand is improving as a result.
Warehouse and logistics based operators have typically been
attracted to the area, with users from the land constrained Gold
Coast and price sensitive users from Brisbane being attracted to
this precinct.
The recent 30,000sqm precommittment by OI Glass underlines
the remergence of the precinct, satisfying both logistics
requirements and the commercial savings sought after by key
corporate decision makers. With major institutions such as
Fraser’s (who are developing OI’s facility), Charter Hall/CIP and
Stockland all having substantial holdings within this precinct,
renewed focus from tenants is expected, primarily being driven
by cost competitive leasing deals compared with the Logan
Motorway and Australia TradeCoast precincts.
Sale and leaseback
There were two transactions in the Yatala Enterprise Area. The
first property transacted for $8.5 million in November 2014 at
Lahrs Road Ormeau within the Motorway Business Park. The
6,430sqm warehouse facility represented a modern structure
with high bays and was sold fully leased on a ten year leaseback.
It is understood the property sold within a month of being on
the market reflecting a sharp yield of 7.43 per cent. The second
transaction was for a modern industrial facility at Burnside Road
Ormeau for $17.5 million. The property, configured to provide
ten separate freestanding industrial buildings ranging between
572sqm up to 3,592sqm, was sold fully leased aside from one
building resulting in a WALE of 3.01 years and a yield of 8.49
per cent. Over time, as land in Brisbane’s other main industrial
precincts becomes exhausted, investment activity in the Yatala
Enterprise Area is expected to grow.
99 Radius Drive, Larapinta (part of the GIC-Frasers Industrial Porfolio)

PERTH MARKET
Second Half 2015
Research and
Forecast Report
Perth’s industrial market has continued to soften during the
September 2015 quarter, after experiencing some moderation
in rents and land values over the first half of 2015.
Available space has increased and limited net tenant demand is
leading to longer vacancy periods in some assets. This is exerting
downward pressure on rents. Lower business sentiment and
moderating domestic demand has been the main driver of low
tenant demand.
Despite challenging conditions, the Western Australian economy
is still supported by $38 billion of private investment spending,
robust export income and continued activity in residential
construction. Unemployment is above the five-year average,
however, at 6.1 per cent is still marginally below the national level
of 6.2 per cent.
There are green shoots appearing in some areas that can drive
industrial demand. Over the past two years a lower Australian
dollar has delivered positive impacts to non-mining exports from
WA. This was evident in the full export container movement
through Fremantle Port, which was eight per cent higher in
2014-2015 compared to 2013-2014, driven by strong volumes
in the September and December 2014 quarters.
Export container movement softened over the second half of
the 2014-2015 financial year, however this looks to be a result
of seasonal factors. Future improvement in exports is expected,
should the Australian dollar creep lower against the US dollar and
major trading partner currencies.
The robust performance of prime or institutional-grade assets
and low interest rates has seen investor demand remain strong
for tenanted assets or vacant assets, with good leasing prospects,
causing yield compression. Recent transactions are showing
market yields of between seven and eight per cent. However,
recent portfolio transactions indicate that yields under 6.75 per
cent are achievable for certain assets. Colliers International
stresses that this tightening is mostly evident among institutional-
grade assets.
Competition for tenants remained high in the first half of the year,
evident by moderating rents. Rental contraction continues to
impact small to medium-sized assets, more so than larger assets.
This is due to the differing stock levels of the two asset classes.
However, larger assets are now experiencing falling demand
and the increase in vacancies is impacting rents.
The fall in demand for hardstand across rates of the metropolitan
area is causing rental levels to return to pre-boom between
$10/sqm and $20/sqm.
Australian Bureau of Statistics (ABS) data showed a surprising
recovery in mining sector employment in the September 2015
quarter. The figures indicate mining sector employment increased
12.3 per cent year on year, to 105,200 in the September 2015
quarter. Putting aside short-term volatility, mining sector
employment continues to be 14.3 per cent lower than its
September 2012 peak.
Lower Australian dollar creating
opportunities to diversify economic base
1 Sudlow Road, Bibra Lake
Sold on behalf of Aspen Group

Industrial RFR Second Half 2015

Industrial RFR Second Half 2015

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (17)

Similar to Industrial RFR Second Half 2015

Similar to Industrial RFR Second Half 2015 (20)

Recently uploaded

Recently uploaded (20)

Industrial RFR Second Half 2015