Although Australia’s logistics sector is undoubtedly at the top of the cycle, superannuation dollars continue to flow into industrial assets. Indeed, it is the only segment of the Australian commercial property market that is still receiving significant allocations from superannuation funds.
For the past few years, super funds have pared back on their real estate holdings. Many have remained under weight in real estate and are hesitant to return to the market.
But in recent months, the likes of UniSuper and Rest Super have begun investing big time in logistics. They look to industrial as diversification of existing property holdings, which have tended to be heavy in office buildings and prime shopping centres.
Rest Super and its investment manager, Barings, undertook the one of the largest single property transactions in Australia post-COVID when they paid Goodman Group A$780 million for a portfolio of 12 warehouses and distribution centres, mostly in Sydney and Melbourne.
The transaction came within weeks of UniSuper and its partners committing hundreds of millions to the sector, including a joint venture with the industry fund-owned ISPT to develop a $3.9-billion logistics hub.
Compared with office or retail, demand for warehouses and distribution centres remains strong and is expected to remain so in the foreseeable future. There is little danger of oversupply, especially in choice locations close to city centres.
For many funds, it is also an opportunity to get into development, or add value to capture further growth upside.
Rest Super and Barings have chosen the assets that they eventually bought from Goodman with a keen eye to future potential, particularly in rent reversion and redevelopment.
It took them many months to negotiate with Goodman Group to secure the portfolio off-market. During the process, Barings and Rest were able to refine and expand on the number of assets that they wanted to buy from Goodman. The latter is selectively shedding some of its logistics assets as it ramps up on the construction of data centres to meet the explosive demand expected from generative artificial intelligence.
The portfolio comes with some 70 hectares of underlying land and approximately 340,000 square metres (sqm) of total leasable areas across Sydney and Melbourne. The portfolio includes the largest wholesale distribution centre in Australia – a 115,000 sqm mega shed in Melbourne’s west for wholesaler/distribution company, Metcash.
At the time of the transaction in May, Andrew Lill, Chief Investment Officer of Rest, said: “After investing successfully in the US industrial property sector and committing to a venture targeting the UK and Europe, we’re pleased to now increase our presence in the Australian market where there is continued strong demand for industrial property.
“We’re confident about our plan to continue investment in industrial property with Barings. We believe there’s value in purchasing well-located industrial assets and we expect rents to increase materially over time.” He says the fund expects the new industrial investments to add diversification benefits to its property holdings and deliver good long-term results for its 2 million members.
Rest Super formed a joint venture with Barings last November and committed to build out an industrial portfolio of more than $1 billion. The partnership’s first industrial asset was acquired from Charter Hall group for $96.1m. With the latest transaction, the partnership has acquired assets totalling close to $900 million but the partners are still open to buying opportunities.
Unisuper Steps Up Logistics Exposure
Perhaps more active than its peers, UniSuper has been stepping up its exposure to logistic over the past year or so. Buying Korea’s National Pension Scheme’ 50 per cent stake in an industrial portfolio for $560 million in July 2023 marked the fund’s entry into logistics. The remaining half is held by Blackstone and ASX-listed Dexus, which is the manager of the fund, known as Australian Industrial Partnership. The fund holds a portfolio of 20 assets located across Sydney and Melbourne and has a total lettable space of more than 340,000 sqm.
In February this year, UniSuper bought surplus land from Orica, the industrial explosive manufacturer, for a 100 per cent interest in a prime warehouse, logistics and manufacturing greenfield development site in Deer Park Melbourne for $260 million. The 66-hectare site is located 15 km west of Melbourne’s CBD and has the potential to accommodate more than 330,000 sqm of logistics and warehouse space when fully developed.
UniSuper, together with GPT and developer HB+B Property, will progressively develop the site as a prime logistics, warehousing, and manufacturing estate over the coming years with a forecast end value of more than $1 billion.
The super fund teamed up with ISPT to buy a 280-hectare greenfield logistics development site at Burra Park in a 50-50 joint venture. The asset is located to the entrance to the new Western Sydney International Airport.
Another heavyweight investor in logistics is Aware Super which has an equal joint venture with Frasers Property Industrial to develop a billion-dollar industrial complex in Sydney’s western suburbs.
The 70-hectare precinct will be developed to become the YARDS, a major industrial and logistics venture at Kemps Creek in Western Sydney. Altis Property, now Barings, is its development manager for the project which has been designed to offer some 400,000 sqm of warehouse space. This is the third largest industrial development for Aware Super in its push to deep its footprint in the industrial sector.
Other projects in its portfolio includes the new Altitude industrial precinct at Bankstown and First Estate in Erskine Park, which backs onto the YARDS.
As an extension to logistics properties, Aware Super also has set up an investment platform targeting the acquisition, construction, and operation of an independent network of intermodal terminals, it is part of the infrastructure portfolio. These terminals are a key cog in the country’s logistics industry. Today, there are more than 150 terminals on the 26,000km national rail freight network was almost exclusively used by their owner/operators.
Australian Retirement Trust (ART) is Mirvac’s partner in the Mirvac Industrial Venture (MIV). The seed asset for MIV will be Switchyard in Auburn, NSW, which is due to be completed now. Located 20 kilometres from the Sydney CBD and six kilometres from Parramatta’s CBD, Switchyard will deliver approximately 72,000 sqm of high-quality industrial space.
Mirvac and ART will continue to look for opportunities to grow the Venture, including by leveraging Mirvac’s remaining $2 billion plus industrial development pipeline, with negotiations on future assets already underway.
In a double-bite, in 2021, AustralianSuper made its biggest ever direct property investment in Australia by taking a 40 per cent stake for $774 million in Australia’s largest intermodal logistics facilities located at Moorebank in southwestern Sydney. Three months later, Australia’s largest super fund joined what is known as the LOGOS consortium to acquire a large-scale logistics development site from Qantas for $802 million in Mascot. The consortium is undertaking a staged redevelopment of the 13.8-hectare site near Sydney Airport.
While they are unlikely to become Australia’s largest industrial/logistics landlords, the recent spate of investment means that Australia’s largest super funds are poised to become key players in a sector that they once shunned.
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