Developer Time and Place has moved quickly to establish a closed-ended fund with commercial real estate investment manager MaxCap to develop and sell logistics lots across Melbourne, Sydney and Brisbane.
The move comes as part of broader trend that has seen non-bank lenders, including super funds and private debt vehicles, move quickly to plug the gap left by mainstream banks.
The Melbourne-based developer, led by director Tim Price, has partnered with financier MaxCap, in order to secure and subdivide larger sites into plots of between 1,000sq m and 5,000sq m which will then be sold to smaller developers or retailers.
The fund is a four-year closed-ended vehicle targeting a strong net return to investors of greater than 15 per cent, with a one-year option to extend.
It has already secured equity commitments equal to about half of its planned $150 million cap, which it hopes to finalise by early 2020.
Melbourne-based MaxCap, which has managed more than $8 billion in commercial real estate investments, already has several successful industrial land subdivisions with Time and Place which served as a “proof of concept” prior to the launch of the new fund.
The industrial sector, which has been turbocharged by growing demand for e-commerce facilities, has now seen many developers and institutions lifting their exposure in order to secure a foothold.
Fuelling the sector has been record infrastructure spending on road and rail, driving the demand for logistics premises, particularly in Sydney, Melbourne and Brisbane.
Time and Place has now commenced its own aggressive acquisition phase, bedding down two sites in Melbourne, a 10-hectare site in Epping and a 16.7-hectare site in Truganina.
“The land-banking behaviour of domestic and offshore real estate investment trusts in key industrial growth areas is reducing the available supply of small industrial lots,” Time and Place director Chris O’Keefe said.
“This is resulting in a significant level of unmet demand.
“We believe fund holds significant value due to the land-lot development model which limits exposure to construction risk, delivers high development margins and capitalises on the current state of the market whereby industrial property is one of the strongest performing sectors,”
According to the latest Colliers industrial research, Sydney had reported an increase in industrial land values in the range of 85-215 per cent for the past five years while Melbourne’s land values had increased 25 per cent to 105 per cent and Brisbane’s 25 per cent to 50 per cent over the same period.
Melbourne's average land values sitting in the range of $305 per square metre to $1,400 per square metre while Sydney is seeing land range of $725 per square metre and $2,750 per square metre with Brisbane enjoying average range of $300 per square metre to $415 per square metre.
“As more than half of the Australian population remains heavily concentrated in Sydney, Melbourne and Brisbane, industrial land values in these capital cities will continue to trend upwards,” Colliers International head of research Anneke Thompson said.
“The transition from bricks and mortar retail to e-commerce retail is becoming another key driver of industrial activity in these regions.”
Perth land values have remained unchanged at $438 per square metre, as were rents at $79 per square metre, however tech giant Amazon this week moved to secure its third fulfilment centre in Australia, sounding out Perth as its next hotspot for ecommerce trade.
