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Why industrial property belongs in a balanced portfolio
When you order something online and it gets delivered the next day, you might think about where you bought it from.
But what most people generally don’t think about, is the warehouse from which it came.
That warehouse, however, has a landlord who is quietly collecting rent and likely getting good returns on their investment.
Continued growth in e-commerce is building a strong base for industrial demand, with research from Cushman & Wakefield forecasting net absorption of industrial and logistics space to reach 2 million square metres in 2026.
At the same time, high costs of construction remain a barrier for industrial developers, with rents required to make new supply stack up sitting 10 to 25 per cent above current market rents.
Cushman & Wakefield estimates speculative supply of industrial property will fall to just under 1 million square metres this year, down from 1.3 million in 2025.
With close to 50 per cent of the 2026 supply already pre-committed, according to CBRE, effective additions to available industrial stock are set to fall well short of demand.
CBRE says Australian industrial vacancies, at just 3.2 per cent nationally, are among the lowest internationally, and are expected to fall towards 3 per cent by mid-2027.
While many investors view industrial property as a complex investment, an income comparison with residential shows it is worth serious consideration as an addition to a balanced property portfolio.
Analysis from Cotality shows residential yields across Australian capitals sit around 3.4 percent, on average. That’s gross yields. When you consider the expenses of residential property, net rental yields are closer to 2 percent
In the industrial sector, CBRE’s research shows super prime midpoint yields average 5.66 per cent nationally and a number of assets can be purchased above 6 percent. That’s usually a net return, as the tenant pays lots of the expenses in running the property.
There’s lots of benefits to investing in industrial property. Leases have longer rent terms than a standard 12-month residential lease, and outgoings such as rates and maintenance are typically covered by the tenants.
What to look for in industrial
Just like residential property, location is the core driver of industrial value. Proximity to ports, transport corridors and existing industrial precincts often results in higher rents, and blue-chip national tenants.
Vacancy risks are lower, and leases are more likely to be renewed in these precincts, while experienced industrial investors look for properties with low site coverage, giving them future redevelopment upside.
Leases with built-in rent review mechanisms are also highly desirable to protect income in a high inflationary environment.
How to access the market
The challenge for investors looking to broaden their portfolios, however, is access.
Quality industrial assets carry high price tags, often beyond the reach of most individuals.
Even if you have sufficient capital to acquire a commercial asset, managing that property requires specialist knowledge.
This is where managed property funds flip the script. A managed property fund pools capital from multiple investors to collectively acquire high-valued assets.
The fund manager handles all the details, from acquisition, to ongoing management and tenant retention.
And most unlisted property funds require a minimum investment of around $50,000 to $100,000, eliminating the cost barrier that makes many investors wary of exposure to the sector.
The Westbridge Industrial Opportunity Fund
Westbridge’s Industrial Opportunity Fund has been built to capitalise on current conditions in Australian industrial property.
The fund targets income-producing assets with value-add potential in the $10 million to $40 million range, a deliberate sweet spot that sits above most private investors but below the typical institutional mandate, resulting in less competition and access to assets with genuine upside.
The fund’s existing portfolio includes a Brisbane Trade Coast property acquired on an initial yield above 7 per cent with more than 50 per cent of its value in land, and a Welshpool acquisition with just 14 per cent site coverage, providing multiple pathways to add value through rent resets, capital improvements, or repositioning at expiry.
Additional assets in Epping, Victoria, and Ottoway, South Australia were recently acquired, with both properties holding similar fundamentals to the broader portfolio.
Westbridge is targeting a 6 per cent per annum monthly distribution yield for the Industrial Opportunity Fund, with special distributions as value-add is realised, and a total return (IRR) target of 11 to 13 per cent.
With more than half of its commercial portfolio invested in industrial property, Westbridge brings a depth of market knowledge that is reflected in every asset the fund acquires.
To learn more about the Westbridge Industrial Opportunity Fund, visit westbridgefunds.com.au
*The target IRR includes all distributions paid as well as the net amount (after payment of estimated costs and expenses and estimated liabilities of the Fund) which would be paid to Unitholders if the assets were sold. Special Distributions are subject to Fund strategies being achieved as outlined in the Information Memorandum (IM). Target returns are targets only, not a forecast and it might not be achieved. Please refer to the IM for more information, noting the section on financial information and risks before deciding whether to invest. Past performance is not a reliable indicator of future performance. Units in this Fund are issued by Westbridge Funds Pty Ltd ACN 652 852 214 AFSL 533936 as Trustee of the Westbridge Industrial Opportunity Fund. Westbridge Asset Management Pty Ltd ACN 151 957 676 is the investment manager of the Fund (Manager). You can obtain a copy of the IM by calling 08 9321 5566, emailing [email protected] or visiting https://westbridgefunds.com.au/portfolio/westbridge-industrial-opportunity-fund/
