MEDIA RELEASE
11 November 2022
Investment funds are snapping up regional industrial properties where relatively higher capitalisation rates, strong tenant covenants, low vacancy rates and land-rich assets provide potential for solid returns, capital appreciation and expansion projects to add value. Regional industrial properties may be favoured over inner-city assets, where tighter yields are more likely to soften in response to rising interest rates.
Leading Australian property fund manager Trilogy Funds continued to expand its Industrial Property Trust throughout 2022, adding several new assets in regional southeast Queensland and New South Wales to its industrial portfolio.
In April this year, the Trust acquired a prominent and strategic 4.91-hectare industrial site in Torrington for $10.75 million, located in Toowoomba’s vibrant and expanding industrial precinct.
In June 2022, the Trust purchased a warehouse and office facility on a 2.61-hectare site, located at Corbould Park in the Sunshine Coast Industrial Park – the region’s largest industrial estate – for $20.6 million.
The Trust also continued to expand into regional New South Wales, purchasing a multi-warehouse facility on a 1.48-hectare site in Tomago, 20 kilometres northwest of Newcastle’s CBD, for $16.14 million in September 2022.
Trilogy Funds co-founder and Managing Director Philip Ryan said industrial property continues to become an increasingly attractive proposition, boosted further by its resilience during COVID-19 and strong supply-demand metrics.
“The Industrial property market largely strengthened during COVID-19, as increased e-commerce penetration created additional demand for warehouse space. Tenants were not asking for rent relief as was the case with retail property and industrial property doesn’t have the same degree of incentives being paid like commercial office property. We’ve also seen rent increases in line with inflation or a minimum amount,” Mr Ryan said.
“The focus for the Trilogy Industrial Property Trust has been buying assets with good lease covenants with solid tenants in areas suited to logistics, warehousing, manufacturing, and mining. As a result, we have concentrated on regional areas, which are delivering significantly better returns for investors.
“The Trust maintains balanced exposure to both capital cities and regional cities, but we’ve been wary of paying too much for assets. The big issue is people overpaying for assets and we are seeing capitalisation rates softening, particularly in capital cities.
“However, the industrial market is somewhat protected by strong supply-demand metrics, and the Industrial Trust’s portfolio is expected to continue to benefit from increasing valuation increases as its assets are progressively revalued,” Mr Ryan said.
Mr Ryan said Trilogy Funds is proactively engaging with their industrial property tenants to ensure they are satisfied with their property and identifying opportunities to add value.
“As an industrial property owner there is a significant opportunity for us to cater to tenants’ specific requirements, enabling us to support our tenants’ business growth, retain a high occupancy and strong WALE in our Fund and deliver the best possible outcomes for the Industrial Trust.
“At our Carrum Downs property for example, we recently completed construction of a 550-square metre extension to the existing warehouse to support the tenant, Tempur Australia, with product expansion. This has contributed significantly to uplift in value of the property and resulted in the tenant extending their lease.
“Expansion potential was also an attractive factor for the recently acquired industrial asset at Corbould Park, where the asset is land rich, with approximately 19% site coverage, presenting ample opportunity to increase the building’s floor area in the future.
Mr Ryan said Trilogy Funds was continuing to seek additional industrial acquisition opportunities.
“The Australian industrial property sector continues to be one of the most attractive property asset classes, supported by underlying fundamentals of robust demand and modest supply.
“While the right properties can be hard to find, we are continuing to actively look for quality investment properties that have tenants of good covenant with the option to value-add through expansion works if possible.”
This media release is issued by Trilogy Funds Management Limited ACN 080 383 679 AFSL 261425 (Trilogy) as responsible entity for the Trilogy Industrial Property Trust (Trust) ARSN 623 096 944. Application for investment can only be made on the application form accompanying the Product Disclosure Statement (PDS) dated 1 July 2021 for the Trilogy Industrial Property Trust ARSN 623 096 944 available at www.trilogyfunds.com.au. The PDS contains full details of the terms and conditions of investment and should be read in full, particularly the risk section, prior to lodging any application or making a further investment. All investments, including those with Trilogy, involve risk which can lead to loss of part or all of your capital or diminished returns. Trilogy is licensed to provide only general financial product advice about its products and therefore recommends you seek personal advice on the suitability of this investment to your objectives, financial situation and needs from a licensed financial adviser. Investments with Trilogy are not bank deposits and are not government guaranteed.
