Goodman Group has forecast strong growth for the year, boosted by urban renewal projects and demand for properties from the e-commerce sector.
Chief executive Greg Goodman said, at the quarterly results to the end of March, during the week, that the group had $1 billion in development projects, which was the best quarter for many years.
"Our development work in progress is $3.2 billion across 72 projects, with a forecast yield "on cost" of 8.1 per cent, with a weighted average lease term of 10.3 years," Mr Goodman said.
Goodman, which has a land bank of warehouses that can be sold to residential developers for urban renewal, said its strategy was ahead of expectations, and has conditionally contracted for sale $2.1 billion of sites in Sydney.
Brokers at Morgan Stanley said the results Goodmand's ability to grow earnings per security at 7.5 per cent while deleveraging continues to underscore a robust operating business providing it with the ability to either "accretively increase capital into development, accretively acquire assets, or implement accretive capital management initiatives".
"In our view, this provides Goodman with the ability to increase work in progress by reinvesting in the development pipeline, potentially acquire assets which would likely be accretive given funding costs, and/or implement capital management initiatives," Morgan Stanley said.
The improved conditions, as spelled out by Goodman, which is the biggest listed industrial real estate investment trust in the country, is reflected in the resurgence of local investors in Sydney's industrial and logistics market.
This has driven sales in the first quarter of 2016 to $318 million, being a 40 per cent increase from the corresponding period in 2015.
CBRE's 2016 first quarter industrial MarketView shows an upturn in local investment activity in the three months to March, offsetting a decrease in the number of offshore buyers active in the market.
In Sydney, foreign buyers accounted for just $12 million of sales during quarter, while local buyers recorded a significant uplift in buyer power, acquiring approximately $306 million worth of industrial property.
CBRE senior director, industrial & logistics, capital markets, Matthew Lee attributed the spike in domestic buyers to the increasingly competitive industrial landscape in Sydney.
"While Sydney's industrial and logistics market continues to be a sought after market from an international perspective, the limited availability of larger assets is driving investors to chase opportunities in other markets," Mr Lee said.
"Meanwhile, we anticipate the transaction volume going to local buyers to also continue increasing across the market, with particular strengthening in the $10 million-$50 million price bracket."
While the national industrial supply pipeline is considerably lower in 2016, reducing the risk of oversupply and supporting rental growth, 765,000 square metres is due for completion in Sydney, a 94 per cent increase from 2015.
