Industrial property a goldmine
Going almost 100 per cent industrial is proving lucrative for industrial landlord Property for Industry, which has posted a record profit of $176.3 million for 2019.
The profit after tax tops a profit of $110m in 2018, which was in itself a doubling of profit from the previous year, thanks to a big jump then in the value of its properties.
A year ago the property company announced it was going 100 per cent industrial and would be selling its non-industrial properties over about 18 months. It sold $40m worth in 2019.
The $176.3 million after tax profit for the year ending December 31 2019 was boosted by $125.2m property value rise, a 9.3 per cent lift in the value of its portfolio of 94 properties which are now worth of $1.476 billion.
Chief executive Simon Woodhams said the company had made excellent progress with divesting non-industrial properties and investing in quality industrial ones.
Now only 10 per cent of its portfolio remained non-industrial and 99 per cent of its portfolio was occupied. Its 94 properties are leased to 144 tenants.
The company intended to replace its remaining nonindustrial assets – including Carlaw Park, an office and mixed use property in Parnell, Auckland – with quality industrial properties in sought-after areas.
Last year it bought four quality industrial properties in Auckland worth $106.4m.
Of the $125.2m jump in the value of its properties, about one-third was due to growth in industrial rents.
As well, continued high levels of demand for industrial property from investors and owneroccupiers was an influence in the rise in valuation and the movement in cap rates contributing the remaining two-thirds of the value rise.
In 2019 the company also enjoyed rising rents. Its net rental income rose 5.3 per cent to $83.3m.
Woodhams said ANZ was forecasting for 2020 and 2021 to end with an Official Cash Rate of 1 per cent.
‘‘Omnichannel retailing’’ was also expected to be a key driver for industrial property, according to real estate firm CBRE.
It estimated that for every $1b of additional online retail sales an extra 100,000 square metres of distribution space was needed.
With the likes of H&M and Chemist Warehouse recently arriving in New Zealand, and others like Cos, Costco, Decathlon, Ikea and Uniqlo signalling their arrival the trend was expected to gather speed over the next few years.