Industry News

Sydney warehouse bought for more than $200 million

A60,000 sqm warehouse leased to Fantastic Furniture and DB Schenker has set a new benchmark in Australia after being acquired by Centuria Industrial REIT (CIP) for $200.2 million on a yield of 3.6 per cent.

The record low return eclipsed the 3.62 per cent yield for a 35,000 sqm Best & Less distribution centre, which AMP Capital sold to a Lendlease investment platform for $130.1 million in May.

Prime logistics assets in Sydney and Melbourne are now regularly trading on sub 4 per cent yields amid the surge in online shopping during the pandemic, which has increased demand for warehouse space.

Centuria’s acquisition of the 60,223 sqm Fantastic Furniture and DB Schenker facility in Fairfield in Sydney’s west was struck at a 48 per cent premium to the facility’s December book value of $135 million.

The deal raised CIP’s portfolio of industrial properties to $3.5 billion.

Ross Lees, Centuria’s Head of Funds Management, said the group’s growth strategy was specifically focused on “metropolitan infill sites that are catered to the last mile logistics sector.

“The pandemic has been a catalyst for domestic online shopping, and we believe there is further growth to come across Australasia,” Ross says.

CIP will partially fund its latest acquisition spree – the fund acquired almost a $1 billion of assets in the 2021 financial year – through a $300 million institutional equity raising alongside a $25 million unit purchase plan.

Centuria’s purchase was on a low yield of 3.6 per cent.

Amazon to add Australian workers for festive season

Amazon Australia has announced plans to onboard 1000 seasonal workers at its fulfilment centres around the country for the holiday season.

The company is looking for workers with a range of experience and skill levels to help pick, pack and ship orders over the festive season. These are new seasonal job opportunities that provide extra income during the holiday season, offering Australians the opportunity to earn competitive pay in a safe and supportive work environment.

These seasonal opportunities can also present a path to employment with, and a longer-term career at, Amazon. Amanda Hadaway’s career at Amazon began with a seasonal position at Amazon’s Brisbane fulfilment centre packing customer orders. She was offered a permanent role and promoted and is now a Process Assistant.

“The potential for growth is so big and it’s a great environment which makes the time fly,” Amanda says. “It is enjoyable and also really rewarding to know customers are getting their orders on time.”

Craig Fuller, Director of Operations, Amazon Australia says the opportunities come at a time when they are needed most.

“There are opportunities for motivated, enthusiastic people from all backgrounds and we look forward to welcoming them to our sites around Australia as we head into the holiday period,” Craig says.

The announcement of seasonal jobs follows a year of job creation across Amazon’s Australian operations network, including the creation of more than 600 new permanent roles at Amazon sites in 2021.

Amazon has five fulfilment centres and 12 Amazon Logistics sites operating in Australia, with sites in Sydney, Newcastle, Melbourne, Perth, Brisbane and the Gold Coast.

Europe postpones FTA negotiations with Australia

The European Union has postponed the 12th round of negotiations for a free trade agreement with Australia to November.

The move is believed to be retribution for the cancellation of a $90 billion submarine contract with French company Naval Group.

The backflip sparked a major diplomatic row with France, one of the European Union’s largest members, and now appears to have hit ties with the entire bloc.

France has publicly said it can no longer trust the Morrison Government, accusing officials of lying and questioning whether the trade agreement can go ahead.

Peter Jones, Founder of Prological, says the delay works against Australia’s best interest in the medium and long term.

“At a time when COVID-19 has shown us the potential gains of being more self-sufficient from a manufacturing perspective, to find ourselves in the position we are in now with the EU challenges the nation’s best interest,” Peter says.

“We need these agreements in place to be able to foster Australian industry and manufacturing, both in terms of being able to competitively procure that which these other nations produce, as well as opening up doors for our own businesses to be able to export in a very competitive global environment.”

Trade Minister Dan Tehan has urged the EU to stick with the FTA.

“A free trade agreement is in the interests of Australia and the European Union and will strengthen our relationship that is built on a shared commitment to democracy, human rights, the rule of law and economic openness,” Dan says.

“We understand the French reaction to our submarine decision, but ultimately any nation must act in its national interest – which is what Australia has done.”

European Commission officials in Brussels listed a range of unresolved issues for the delay, including geographical indications, market access, intellectual property rights, public procurement and sustainable development.

In 2020, the trade in goods between the Australian and European economies was valued at $58 billion and at $42 billiom in services.

Coles boss warns of Christmas supply chain crunch

Coles CEO Steven Cain says the supermarket giant is bracing for difficult months ahead because of severely disrupted supply chains and covid regulations forcing staff to isolate.

Steven says 3000 Coles staff are currently at home isolating, while many of its suppliers were also struggling with staff challenges due to the strict stay-at-home rules.

“At this point, with Delta, we’re at our most difficult stage. We’ve got many team members in isolation, we’ve got severely disrupted supply chains, and we’ve got people working very hard,” he says.

“Right now across the country we’ve got 3000 team members in isolation, which we have to manage, and then we’ve got a lot of our suppliers in similar situations so thinking about how we plan for Christmas is really important.”

The Coles boss says Victoria is at the start of supply challenges, as the country’s supermarkets push for government to relax 14-day quarantine rules.

“We’re working with the six health authorities, the federal and the states and territories, to try and get consistent rules and regulations, particularly around where there’s been close contact,” Steven says.

“If a team member of ours has caught COVID outside of work, and they come into work, the whole shift goes down. So we lose 50 people at a time for 14 days, because one person has turned up.”

Alongside the supply chain and staff challenges, Coles is also feeling the impact of restrictions in place for the construction industry.

“We’ve got hundreds of millions of dollars of projects, almost frozen at the moment in New South Wales and Victoria because of construction stoppages or delays,” he says.

“You just have to work around it and so I think we’ve all become a lot more agile and flexible in how we think about the business.”

3000 Coles staff were at home isolating in October.

Sydney logistics space drying up

Only 5 per cent of industrial zoned land in Sydney is currently undeveloped and serviced.

According to CBRE’s latest research, 720,000 sqm of additional Sydney logistics space will be needed just to meet soaring e-commerce sales.

CBRE’s new Sydney Industrial & Logistics Land Supply report forecasts that a lack of industrial land supply in the inner city coupled with rising e-commerce demand will drive a market step change.

Report author Sass J-Baleh, CBRE’s Australia head of Industrial & Logistics Research, says prior to 2020, Australia’s retail inventory sales ratio had been trending down for 30 years, reflecting a ‘just in time’ model.

“Global supply chain disruptions have highlighted the need for retailers, particularly those using an online sales platform, to hold more inventory to minimise fulfillment delays, which is driving greater demand for Industrial & Logistics space,” Sass says.

“Rising inventory requirements due to the expansion of the e-commerce sector is a trend we have observed in the US since 2012, and we expect this to be replicated in Australia over the coming years.”

These rising requirements are driving capital and rental value growth in Sydney’s industrial sector, underpinned by the fact that just five per cent of industrial zoned land in Sydney is currently undeveloped and serviced – equating to just 605 hectares of potential supply.

“This lack of land availability is particularly evident in Sydney’s inner precincts, which are becoming ever more sought after as ‘last mile’ hubs as e-commerce penetration rates rise,” Sass adds.

“As an example, just 0.2 per cent of the city’s undeveloped, serviced land is situated in Sydney’s north shore, compared to 43.4 per cent in the outer south west, and this is being clearly reflected in land and rental value differences. Over the next 18 months we forecast further limits to the availability of undeveloped and serviced land in Western Sydney, with no availability expected in Sydney’s inner precincts over the medium term.”

CBRE’s report highlights that Sydney land absorption has averaged 137 hectares per annum over the past decade, while leasing activity has averaged 805,000 sqm over the same period.

Retail and e-commerce transactions are playing a growing role, with the predicted 720,000 sqm of e-commerce space needed in the next four years translating to a 37 per cent jump in overall supply levels compared to historic averages.

CBRE Pacific Regional Director, Industrial & Logistics, Cameron Grier says given Sydney’s limited development pipeline and lack of speculative activity, this is expected to drive rental growth rates and result in further land value appreciation over the short to medium term.

“Even factoring in new serviced and zoned land corridors emerging in the medium term such as the Mamre Road Precinct and Badgerys Creek, a forecast rise in occupier demand is expected to offset any oversupply risks,” Cameron notes.

“The Industrial and Logistics land market has well and truly been reset and traditional institutional developers are now willing to pay prices that were previously only in the realm of data centres.”