Industrial Yields Driven Down
June 28 2021
Growth and returns to come for industrial investors
Industrial property continues to be the stand out sector in the commercial market in 2021.
Market yields have compressed significantly with sales reflecting yields of 5.5%-6.5% net. However, this yield has been driven down by owner-occupiers as much as investors.
Growth in the eCommerce, building and storage sectors and demand from owner-occupiers for vacant possession properties has led to scarcity and, in turn, price increase on a square metre basis.
Such sales have pushed up prices for industrial tenanted investments, which has lowered the initial return on investment.
Many rentals are stuck at rates which were struck prior to and during COVID, when business owners were able to negotiate competitive rates due to the uncertainty at play and prior to current stock shortages.
Over the next couple of years we believe the rental rates currently being obtained will be re-evaluated at the time of market reviews or when a lease expires. As that cycle plays out those rentals will see growth which will be reflected in the returns for investors in time.
Buyers, vendors and investors are welcome to reach out to Kollosche Commercial for expert advice or assistance with your commercial asset, including commercial leasing and property management.