It is not only occupiers and investors who are taking up space and investing in industrial and logistics assets in record levels, banks and non-bank lenders are also increasing their allocations to this sector.

JLL’s analysis of recently released quarterly property exposure data from the Australian Prudential Regulation Authority (APRA), of quarterly commercial property exposures broken down by asset classes, shows both domestic and foreign bank allocations to industrial have been at a faster rate over the past 12 months to December 2021 than any other commercial property sectors.  JLL’s analysis of the figures show the change in industrial asset exposure quarter-on-quarter is on average 5% over the previous 12-month period, whereas office and retail are running at 2% and 1% respectively.

JLL’s analysis of the 2021 December quarter APRA figures also show that overall exposure to industrial assets as a percentage of total bank commercial property exposure has risen at approximately double the rate of office and retail asset exposures over a 3-year period, with industrial rising 43%, in contrast to 23% and 16% respectively.

JLL’s Director, Debt Advisory, Josh Erez said: “Lenders have historically been underweight industrial in their portfolios, comparatively to office and retail, but that continues to change, off the back of the record highs achieved in industrial markets during the past two years and the sector being seen as more defensive in the new age of online commerce and last mile logistics.”

“Our recent experience having worked on transactions involving both stabilised portfolios and development projects suggest banks, both foreign and domestic as well as non-banks, are keen to finance more industrial assets.

“We a seeing a very healthy level of competition between lenders for these assets, with flexible covenants and sharp pricing being achieved. This all makes for very accretive financing terms for borrowers,” said Mr Erez.

JLL’s Head of Debt Advisory, Matthew Duncan said: “The increase in industrial lending from banks is also being driven by the institutionalisation of the sector as a whole. Lenders tend to follow sponsors/clients, which means as the REITs and other top tier institutions/private groups become more active in the market they are following these clients into transactions and supporting their investment strategies.”

Source: APRA, JLL Debt Advisory, March 2022