Email Phone Next Scroll to move Touch to move edit Play Play Pause Volume Mute Zoom Open Close Search Linked In Linked In X Facebook Instagram Close
CIP_M80 Connect Campbellfield Vic banner
Back to media centre

CIP growth bolstered by infill industrial market tailwinds

43% re-leasing spreads1 achieved across +300,000sqm during FY242

  • Delivered on FY24 upgraded 17.2cpu FFO3 guidance; distribution of 16cpu in line with guidance
  • Forecasting third consecutive year of earnings growth; FY25 guidance: 17.5cpu FFO, 16.3cpu distributions4
  • $120m in divestments at average 4% above prior book values5
  • Strong balance sheet: $100m refinanced, 34% pro forma gearing6,7, 93% hedged, no debt expiry until FY268.

Australia’s largest listed pure-play industrial fund, Centuria Industrial REIT (ASX:CIP), has continued to harness strong tailwinds within urban infill “last mile” industrial markets, achieving average re-leasing spreads of 43%1 across 301,583sqm of leasing2 throughout FY24.

The strong leasing success was achieved across 39 transactions and eclipses the re-leasing spreads secured in FY23 (30%) and FY22 (11%) due to sustained low vacancy levels and persistent tenant demand for high-quality urban infill industrial space. CIP’s portfolio has an 84% weighting9 to Australian infill industrial markets.

Illustrative of strong occupier demand, CIP’s assets achieved a 43-day average downtime between leases during FY24.

Grant Nichols, CIP Fund Manager and Centuria Head of Listed Funds, said, “With a portfolio focused on urban infill industrial markets, CIP continued to capitalise on strong market tailwinds to deliver exceptional re-leasing spreads. With around 39% of portfolio leases expiring by FY28, CIP is well placed to continue benefiting from the rental growth that has occurred across Australia’s urban infill industrial markets and the unrealised positive rental reversion imbedded within its portfolio.

“Significantly, this strong leasing activity enabled CIP to grow its forecast earnings for the third consecutive year with rental growth continuing to more than offset the higher interest rate environment. On the capital transactions front, solid investment demand for urban infill industrial property helped stabilise CIP’s portfolio valuations at 30 June 2024.”

CIP delivered on its FY24 upgraded Funds From Operations (FFO)3 guidance of 17.2 cents per unit (cpu) and distribution guidance of 16.0 cents per distribution unit (dpu).

Also throughout the year, the REIT executed $120 million of non-core divestments at an average 4% premium to book value5. The transactions underpin CIP’s Net Tangible Assets (NTA) of $3.87 per unit.

CIP’s portfolio consists of 89 industrial assets worth $3.8 billion10, complemented by a 97.1% portfolio occupancy11,12 and 7.6-year WALE11. As at 30 June 2024, CIP’s Weighted Average Capitalisation Rate (WACR) expanded 17 bps on a like-for-like basis to 5.81%, with market rental growth and leasing success offsetting the capitalisation rate movement, resulting in a c.$5 million valuation gain or 0.1% increase from December 202313.

CIP maintains a strong balance sheet with 93% of its debt hedged, 34% pro forma gearing6,7 and no debt expiring until FY268. CIP also recently refinanced $100 million of FY25 debt maturities.

Jesse Curtis, Centuria Head of Funds Management, said, “The domestic industrial real estate market continues to exhibit strong tailwinds driven by rising ecommerce adoption, a growing population, and a trend towards onshoring supply chains in the wake of global supply chain uncertainty. CIP has established a portfolio that capitalises on these trends to the benefit of its unitholders.”

Specifically, CIP cited CBRE research which shows the impact of ecommerce adoption driving occupier demand with a forecast $15 billion increase in online transactions by 2027 requiring a predicted c.1.1 million square metres of additional logistics space14.

Grant Nichols, concluded, “Looking ahead, strong sector tailwinds such as ecommerce adoption, onshoring of production and assembly, data centre growth and increased demand for cold storage will continue to benefit Australian industrial markets, particularly infill industrial markets where there is the greatest tenant demand. For a portfolio with existing critical mass in Australian urban infill industrial markets, CIP is positioned to benefit from these tailwinds given the limited potential for additional supply within these markets.”

CIP provides FY25 FFO guidance of 17.5 cpu and distribution guidance of 16.3cpu4, which will be paid in quarterly instalments.

  1. On a net rent basis compared to prior passing rents
  2. Includes heads of agreement (HOA)
  3. Funds From Operation (FFO) is CIP’s underlying and recurring earnings from its operations. This is calculated as the statutory net profit adjusted for certain non-cash and other items
  4. Guidance remains subject to unforeseen circumstances and material changes in operating conditions
  5. Including the divestment of 54 Sawmill Circuit, Hume ACT which was exchanged in July 2024
  6. Gearing is defined as total interest bearing liabilities divided by total assets
  7. Proforma adjustment for the divestment of 54 Sawmill Circuit, Hume ACT for $28.1m which was exchanged in July 2024
  8. Including $100m debt facilities refinanced in July 2024
  9. By value
  10. CIP ownership share of joint venture assets
  11. By income
  12. Excludes assets that have been withdrawn and currently undergoing significant repositioning works, being 30 Fulton Drive, Derrimut Vic and an 8,364sqm cold storage tenancy at 102-128 Bridge Road, Keysborough Vic
  13. On a like-for-like basis, excludes capital expenditure incurred
  14. Source: CBRE Research – Australia’s e-commerce in the post-pandemic era