ARTICLE

Why demand for Australian industrial property is set to continue

 

Several factors have come together to create a perfect storm of soaring demand for industrial property across many parts of the world.

Australia is no exception, as investors who have traditionally relied on residential property and the share market to drive their investment portfolios and retirement strategies are increasingly turning to the potential of higher yields from industrial real estate.

The national industrial vacancy rate has fallen to a historic low of 2.24 per cent, says a new report from CBRE, reaching just 1.4 per cent in Sydney and 1.54 per cent in Melbourne.

“In 20 years, I have not witnessed such vast volumes of leasing enquiry,” says Cameron Grier, CBRE’s regional director of Industrial & Logistics.

This has not been restricted to the major east coast markets, he added, with South Australia and Western Australia also experiencing record demand.

 

Trilogy Funds Managing Director, Philip Ryan & Executive Deputy Chairman, Rodger Bacon

 

 

 

 

 

 

 

 

 

 

Trilogy Funds Managing Director, Philip Ryan, said the industrial sector was supported by strong underlying fundamentals of robust demand and modest supply.  

“With Australia’s historically low interest rates, there is strong appetite for investments in the industrial property sector right now due to its potential for competitive yields with long-term capital growth prospects,’’ he said.

“Demand for industrial property in Australia should continue to rise – particularly as institutional investors gear their strategies toward greater exposure in the industrial sector and build their investment portfolios.” 

Industrial space was already in high demand in many advanced economies before the COVID-19 pandemic, but the accelerated growth of e-commerce and restructuring of supply chains that has occurred since its emergence have caused a further sharp spike in requirements for warehousing and logistics space. 

At the same time, investors seeking competitive returns, companies looking to take advantage of the low-rate environment to acquire their own industrial premises rather than renting, and government driven infrastructure developments are driving up demand across regional locations. 

Upward momentum in prices locally is also being buoyed by strong foreign demand for Australian commercial property. In the first quarter of 2021, $2.4 billion flowed into the sector from abroad, and in April a portfolio of 45 Australian industrial assets sold for almost $4 billion to Asian investors. 

Property experts don’t see demand changing soon. CBRE forecasts that an additional 2,500,000 sqm of industrial space will be required in Australia over the next five years to support the growth of online shopping alone. 

“E-commerce last year experienced five years of growth in just 12 months and now accounts for around 13% of all retail sales in Australia,’’ notes CBRE’s Industrial and Logistics Vacancy Report H1 2021.

“But Australia still has a long runway for growth in this area to catch other APAC countries that range between 20% and 40%. This coupled with the fundamental rethink of how occupiers deal with inventory levels has set up 2021 as a great year for owners of industrial and logistics property.’’

Low vacancies are translating into strong capital appreciation, with industrial land prices in west Melbourne for example more than doubling over the past four years.

Industrial space is a specialised segment of the commercial real estate market. It is typically tenanted by large companies with particular needs including proximity to major transport links, good access for large vehicles and significant roof and gantry heights. 

These firms make excellent tenants as they are generally willing to sign long lease agreements with fixed rental increases, giving investors more stability than a typical residential lease.

And they are often signed up on net leases, meaning tenants bear costs such as insurance and maintenance that would normally be paid by the owner. 

 

Seeking finance for an industrial project?

Trilogy is currently providing construction finance at interest rates from 6.95% p.a.*

Chat to a member of the Trilogy Lending team

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*Terms & conditions apply.
This article has been prepared for prospective borrowers and provides information only about Trilogy’s lending services. Trilogy is not a licensed credit provider and does not make loans regulated by the National Credit Code. The source of Trilogy’s loans may include managed investments schemes registered with ASIC, as well as other private lending arrangements with high net worth investors. If you would like more details on our investment opportunities, please contact us.

Property Development & Construction loans

Interest rates from

6.95% p.a.*

*Terms & conditions apply

For over 20 years our managed funds and private investors have enabled the successful completion of hundreds of projects along the eastern seaboard of Australia, supported by an experienced team and driven by our flexible and tailored approach.

As one of Australia’s leading non-bank lenders, we provide finance solutions between $3 and $30 million to the residential, commercial, industrial, and retail property sectors.

As the performance of each loan funded through Trilogy underpins the returns provided to our investors, your success is our success.

Can we help your clients?

We understand what’s required to help your clients get the best project outcomes.

In construction and property development, cost and timing are critical, which is why our focus is on providing your clients with a finance solution that is personalised.

We have funds available from our pooled mortgage fund, the Trilogy Monthly Income Trust, and they are ready to deploy.

Whether it’s for land sub-division, residential construction or completed stock, inner-city or regional, our team is available to discuss your clients’ project finance needs.

Can we help you?

After more than 20 years working with brokers and borrowers to finance successful construction and development projects, we understand what’s required to assist you in helping your clients achieve the best project outcomes.

Target loan criteria

  • Property development & construction experience – proven track record
  • Loan size between $3 & $30 million
  • LVR no greater than 65% of the GRV
  • Registered first mortgage
  • Clear marketing strategy for sell down or refinance

Our portfolio managers will provide you with:

  • Timely responses
  • Competitive tiered pricing model
  • Tailored support
  • Recognition of referrals

Let's discuss your clients' projects

By Trilogy

Property development and construction loans by Trilogy

Due to strong and continued support from thousands of investors via returns available from our pooled mortgage fund, the Trilogy Monthly Income Trust, there is a healthy availability of funds for finance.

Explore our loan case studies

Our team

Our Lending team will work with you and your clients to fully understand their finance needs, tailoring a loan which best enables them to beginprogress with timely drawdowns and complete their projects on time. 

We also have staff who specialise in managing construction progress draws and processing contractor remittances and invoices, to ensure payments are processed on time.

On top of that, we have longterm relationships with a comprehensive network of property professionals, who specialise in quantity surveying, project management. real estate agency services and more, so the necessary consultants are always on hand to assist where needed.

Your team of Portfolio Managers

Brisbane, QLD

Jack | Trilogy Funds Australia

Jack Mihajlovic

Senior Portfolio Manager

Brisbane, QLD

j.mihajlovic@trilogyfunds.com.au

0419 791 495

Andrew Gillespie | Trilogy Funds Australia

Andrew Gillespie

Senior Portfolio Manager

Brisbane, QLD

a.gillespie@trilogyfunds.com.au

0431 000 681

Greg Turner | Trilogy Funds Australia

Greg Turner

Portfolio Manager

Brisbane, QLD

g.turner@trilogyfunds.com.au

0423 448 357

Sonia Harding

Portfolio Manager

Brisbane, QLD

s.harding@trilogyfunds.com.au

0449 253 929

Sonia Harding | Trilogy Funds Australia

Sydney, NSW

Scott Morgan | Trilogy Funds

Scott Morgan

Senior Portfolio Manager

Sydney, NSW

s.morgan@trilogyfunds.com.au

0425 363 665

Matthew Silvester | Trilogy Funds

Matthew Silvester

Senior Portfolio Manager

Sydney, NSW

m.silvester@trilogyfunds.com.au

0414 882 398

Melbourne, VIC

Darren Martin | Trilogy Funds Australia

Darren Martin

Senior Portfolio Manager

Melbourne, VIC

d.martin@trilogyfunds.com.au

0435 603 004

Miguel Dennis | Trilogy Funds

Miguel Dennis

Senior Portfolio Manager

Melbourne, VIC

m.dennis@trilogyfunds.com.au

0474 208 668

Frequently asked questions

Do you provide home loans?We work with brokers and direct property developer clients seeking finance for commercial property only. We do not provide loans to individuals seeking home loans.
Why am I not eligible for your lowest interest rate for construction finance?Each loan that we finance must be first registered mortgage. From there, we assess a loan application based on a borrower’s track record, loan size between $3 & $30 million, target LVR no greater than 65% of the GRV, and clarity of the marketing strategy for sell down or refinance. Premium pricing is offered to borrowers with risk mitigants such as pre-commitments and a lower LVR.
What is your LVR limit?Our preferred maximum LVR is 65% of the Gross Realisable Value (incl. GST), and a maximum of 70% LVR on the “as-is” land value.
Do you only lend if pre-sales have occurred?No. We do not have a maximum cap on TDC or pre-sales. Interest/fees are capitalised within the facility limit.
Do you fund GST?Yes.
What is your loan term?Our target loan term ranges from 12 months to a maximum 24 months.
Do you have relationships with relevant constants that can assist with my project?We also have staff who specialise in managing construction progress draws and processing contractor remittances and invoices, to ensure your payments are processed on time and allowing your project to reach completion or progress to its next stage. On top of that, we have long–term relationships with a comprehensive network of property professionals, who specialise in quantity surveying, project management and real estate agency services and more, so the necessary consultants are always on hand to assist where needed.
What sectors do you focus on?We lend to property development and construction projects in the residential, industrial, commercial and retail property sectors.

Can’t find the answer you’re looking for? Get in touch with our Lending team on 1800 230 099 or email lending@trilogyfunds.com.au who will be able to point you in the right direction.