‘Never heard of’: The niche commercial assets driving investor demand

Knight Frank partner, research and consulting, Queensland, Jennelle Wilson, said cold storage and IOS were increasingly in demand from institutional investors, while offshore and onshore entities continued to solidify their Australian industrial holdings.

“With existing standard warehouse assets tightly held, many offshore buyers have grown their Australian portfolio through these more specialised assets, which are generally accepted as mainstream asset classes in offshore markets,” she told sister brand Real Estate Business (REB).

“While offshore investors were early adopters of these assets, local REITs and wholesale funds have also been quick to follow.”

Wilson said investments in those classes were assessed in the same way as generic warehouse properties.

She said the age of improvements, location, and tenant agreements were all key considerations, with overall investment and yield paradigm in line with the wider industrial market.

Cold storage

According to Knight Frank, the cold storage industry has been experiencing a revitalisation in the past two years, as new, modern facilities have continued to be built.

“Ageing facilities lack the energy efficiency, green ratings and upgraded panels that major corporate tenants seek to align with wider corporate objectives,” the company said.

It said an uplift in newly built, retrofitted cold storage facilities had struggled to keep up with demand compared to other industrial assets.

The cold storage market has seen a consistent boost in rents across the market, as a result of underlying costs to construct the facilities as opposed to location.

“Rents of $350/sqm+ net are no longer considered unusual,” Knight Frank said.

Industrial outdoor storage

According to the firm, hardstand, or industrial outdoor storage, has been evolving into a more defined asset class in recent times.

These assets can include facilities for long-term parking of heavy vehicles, storage of shipping containers, or operation of industrial machinery.

Knight Frank said many deferred development sites have been increasingly repurposed for industrial outdoor storage in five or 10-year periods.

In particular, some facilities have become storage for high-load-rated containers or bitumen- and hail-netted facilities for vehicle storage.

“Due to a lack of options, tenants seeking power, internet and other improvements to the site will pay the economic rent to deliver these services,” Knight Frank said.

Onshore essential materials

Looking ahead, Knight Frank said the market was likely to continue being driven by the onshoring of essential materials and manufacturing.

It said that, originally beginning as a post-COVID-19 goal to secure essential pharmaceuticals and material inputs, recently, the initiative has become a concrete action.

“Initially this was due to the Trump-induced tariff trade uncertainty and Federal Government incentives such as the $15 billion National Reconstruction Fund,” it said.

In recent weeks, Knight Frank highlighted the critical need for essential materials manufacturing amid ongoing oil export interruptions from the Middle East.

It said the global conflict had exposed Australia’s limited production and storage capacity across fuel and agricultural products.

The network said Australia was likely to succeed in attracting commercial investment in industries such as advanced manufacturing, green energy, and critical technology, which depended on its highly-skilled workforce.

The firm said, despite labour costs in sectors including defence, meditech, envirotech, and other life sciences, the expenses will be a disadvantage, rather than a hindrance to investment.

“Federal Government intervention and support for other critical inputs to the economy will also emerge in the short term, but have longer term impacts on the way Australia produces and stores such critical resources,” it concluded.

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