A large industrial warehouse leased to a subsidiary of building products giant CSR in Melbourne’s south-eastern industrial heartland is setting fresh benchmarks for industrial yields, selling for $23 million.
The property across two titles at 13-27 and 29-43 Whiteside Road in Clayton South covers a 39,720 sq m site with a warehouse and office space leased to Viridian, one of Australia’s largest manufacturers of glass.
Cushman & Wakefield’s head of industrial Andrew O’Connell, who managed the sale with colleague Robert Colaneri, said the property sold on a yield of 6.56 per cent, at the lower end of the range for industrial assets in a market where increased competition is driving strong sales.
But tightening yields across the industrial sector were worrying sign that some investors were “buying and paying a premium for cashflow” which could disappear when a lease expired, Quintissential fund manager Shane Quinn said.
“We’ve got big concerns people are paying a premium over their asset’s replacement value around the country,” Mr Quinn said.
Mr Quinn said in the current market it was “hard” to stick to fundamentals, but the banks’ recent tightening of lending standards for investment-grade stock would result in “good buying over next six to 12 months at sensible metrics”.
Investment in Melbourne’s industrial sector totalled $200 million in the first quarter of this year, with the second quarter on track to match the volumes seen in the same period last year when $309 million in assets sold.
The property, bought by a private Chinese Australian investor, had a WALE of 7.75 years and returned net annual income of $1,574,157.
The same investor snapped up a double-story brick warehouse at 575 Burwood Highway in Knoxfield late last year and owns a shopping centre in Hawthorn.
The property was sold by DMS Glass Properties, a company owned by Don Mathieson, the brother of wealthy hotelier Bruce Mathieson.
“There is lack of quality industrial investments with strong lease covenants in Melbourne’s south-east, and there is an investment appetite for industrial sites up to $50 million,” Mr Colaneri said.
Results this quarter include 40 Howley’s Road in Notting Hill which sold for $10.55 million, an asset in the Altona Logistics Park on Toll Drive which went for $7 million, and 68 Kirkham Road in Keysborough which fetched $15 million, he said.
Two large investment portfolio deals had also boosted sales over the quarter.
“We expect to see the fundamentals of the industrial market and constrained stock levels underpin increased competition for assets for the remainder of this year,” Mr O’Connell said.