Australia’s largest listed pure-play industrial fund, Centuria Industrial  REIT (ASX: CIP), has continued to harness strong tailwinds within urban infill “last mile” industrial markets, achieving average re-leasing spreads of 43% across 301,583sqm of leasingthroughout FY24. 

The strong leasing success was achieved across 39 transactions and eclipses the re-leasing spreads secured in  FY23 (30%) and FY22 (11%) due to sustained low vacancy levels and persistent tenant demand for high-quality  urban infill industrial space. CIP’s portfolio has an 84% weighting to Australian infill industrial markets. 

Illustrative of strong occupier demand, CIP’s assets achieved a 43-day average downtime between leases during FY24. 

Grant Nichols, CIP Fund Manager and Centuria Head of Listed Funds, said, “With a portfolio focused on urban  infill industrial markets, CIP continued to capitalise on strong market tailwinds to deliver exceptional re-leasing  spreads. With around 39% of portfolio leases expiring by FY28, CIP is well placed to continue benefiting from the  rental growth that has occurred across Australia’s urban infill industrial markets and the unrealised positive rental  reversion imbedded within its portfolio. 

“Significantly, this strong leasing activity enabled CIP to grow its forecast earnings for the third consecutive year with rental growth continuing to more than offset the higher interest rate environment. On the capital transactions  front, solid investment demand for urban infill industrial property helped stabilise CIP’s portfolio valuations at 30  June 2024.” 

CIP delivered on its FY24 upgraded Funds From Operations (FFO) guidance of 17.2 cents per unit (cpu) and distribution guidance of 16.0 cents per distribution unit (dpu). 

Also throughout the year, the REIT executed $120million of non-core divestments at an average 4% premium to book value. The transactions underpin CIP’s Net Tangible Assets (NTA) of $3.87 per unit. 

CIP’s portfolio consists of 89 industrial assets worth $3.8billion, complemented by a 97.1% portfolio  occupancy and 7.6-year WALE. As at 30 June 2024, CIP’s Weighted Average Capitalisation Rate (WACR)  expanded 17bps on a like-for-like basis to 5.81%, with market rental growth and leasing success offsetting the  capitalisation rate movement, resulting in a c.$5million valuation gain or 0.1% increase from December 2023. 

CIP maintains a strong balance sheet with 93% of its debt hedged, 34% pro forma gearing and no debt expiring until FY26. CIP also recently refinanced $100million of FY25 debt maturities. 

Jesse Curtis, Centuria Head of Funds Management, said, “The domestic industrial real estate market continues to exhibit strong tailwinds driven by rising ecommerce adoption, a growing population, and a trend towards  onshoring supply chains in the wake of global supply chain uncertainty. CIP has established a portfolio that capitalises on these trends to the benefit of its unitholders.” 

Specifically, CIP cited CBRE research which shows the impact of ecommerce adoption driving occupier demand with a forecast $15billion increase in online transactions by 2027 requiring a predicted c.1.1million square metres  of additional logistics space. 

Grant Nichols, concluded, “Looking ahead, strong sector tailwinds such as ecommerce adoption, onshoring of  production and assembly, data centre growth and increased demand for cold storage will continue to benefit  Australian industrial markets, particularly infill industrial markets where there is the greatest tenant demand. For  a portfolio with existing critical mass in Australian urban infill industrial markets, CIP is positioned to benefit from  these tailwinds given the limited potential for additional supply within these markets.” 

CIP provides FY25 FFO guidance of 17.5 cpu and distribution guidance of 16.3cpu, which will be paid in quarterly instalments. 

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