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Australia’s largest listed pure-play industrial fund, Centuria Industrial REIT (ASX: CIP), today announced it has acquired eight hectares of land at 95-105 South Gippsland Hwy, Dandenong South VIC and entered into a Development Management Agreement to construct a new six-asset industrial estate with an estimated end value of $88.8 million.
CIP is capitalising on a rare opportunity to secure brand-new industrial assets in a market where vacancy levels are approximately one per cent1.
The estate will be developed in partnership with specialist commercial and industrial developer Cadence Property Group (vendor) and constructed by Texco Construction, providing industrial units ranging from 3,395sqm to 13,610sqm and catering to a diverse range of industrial users.
Total Gross Lettable Area (GLA) will be 40,380sqm.
Jesse Curtis, CIP Fund Manager, said, “This Dandenong South acquisition is a rare opportunity to secure a high-quality, sustainable asset in a market affected by a scarcity of investment-grade industrial properties. The asset builds CIP’s value add pipeline and delivers brand new industrial products to the portfolio creating further value for unitholders.
“The strong performing southeast Melbourne industrial market is hotly contested with prime-grade vacancy currently around one per cent1. The site is set to benefit from the newly announced Dandenong South Inland Port, enabling direct containerised freight from the port of Melbourne which is expected aid in leasing demand.”
The transaction increases CIP’s portfolio to 63 assets and portfolio value on completion of $2.7 billion. The new industrial facilities will complement CIP’s existing seven assets within southeast Melbourne.
The REIT has a strong track record for delivering value-add projects.
In 2020, it doubled the size of its Townsville Regional Distribution Centre, adding significant cold storage space. The development resulted in the sole tenant, Woolworths Group, extending its lease from seven years to 12 years.
The REIT also repositioned and refurbished its industrial facility at 46 Gosport Street, Hemmant QLD, increasing occupancy to 95% and delivering a 51% valuation uplift2.
Currently, CIP is also constructing a 10,244sqm industrial facility in Bundamba, QLD, which is due for completion in the coming months.
Like the Bundamba development, the development aims to achieve a Green Building Council of Australia Design and As Built ‘v1.3’ Five-Star Green Star rating for the Dandenong South property, incorporating sustainable features including solar panels, recycled water, sustainable and recycled building materials and native vegetation.
Curtis continued, “Investment-grade industrial assets within the eastern seaboard, particularly within infill markets, are in short supply given the demand from e-commerce users. CIP has strong leasing and value-add expertise to leverage these trends to deliver high-quality assets in well located industrial markets.”
The asset will be funded through existing and new debt. Practical completion is expected in FY22.
1. Source: Colliers Research, April 2021
2. Excluding capital expenditure incurred in repositioning the asset