Gateway Capital launch $1b industrial fund with Cadillac Fairview
The booming industrial market has enticed Gateway Capital and Cadillac Fairview to launch a new investment vehicle with the intention to assemble a $1 billion portfolio along and across Australia’s east coast.
Alongside the new investment vehicle, Cadillac Fairview, which is the real estate arm of Ontario Teachers’ Pension Plan, has acquired a strategic stake in Gateway Capital.
The new investment vehicle, Gateway Capital Urban Logistics Partnership (GULP), will focus on urban core plus value add and development assets, and seek opportunities in areas that are forecast to benefit from strong tenant demand linked with the growth of e-commerce, together with other structural tailwinds supporting the industrial and logistics sector.
Founded by Stuart Dawes and Peter McDonald in 2021, Gateway Capital works exclusively with institutional investors to drive value from real estate through defined investment strategies. It has about $420 million of assets under management at December 2022.
Dawes said the global expertise and broad investment capability of Cadillac Fairview provides “significant strategic value to Gateway Capital”.
“We believe strongly in the urban industrial and logistics markets and are confident that our track record and deep experience in these markets will identify assets where we can add value to create attractive core assets and ultimately deliver strong investor returns,” Dawes said.
Demand for warehouse space is reaching record levels, and combined with the low supply, it is driving widespread rental growth.
In Knight Frank’s latest report, vacancy rates are at a record low across the eastern seaboard cities following a 56 per cent drop in availability, with Sydney the tightest market. Vacancy in Melbourne fell by 70 per cent in 2022, while Sydney fell by 31 per cent in 2022.
Knight Frank national head of industrial logistics James Templeton said limited availability and pent-up demand had triggered unprecedented rental escalation nationally.
“There is ongoing intense competition for available industrial space, especially new stock, which has led to surging double-digit rental growth,” Templeton said.
“Alongside face rental growth, incentives have also fallen slightly, which has seen stronger growth in effective rents, particularly in precincts where rents have historically been lower, such as Sydney’s outer west and south-west and Melbourne’s west.”
Templeton said the south Sydney market is the tightest, with no vacancy recorded since the third quarter of 2021, while the inner west and outer west experienced significant vacancy decline in 2022.
This limited vacancy has left tenants with no choice but to negotiate or renew leases for space three to 12 months in advance.
Global industrial property giant Goodman said demand is so strong and land scarce at south Sydney that is developing its multi-level Burrows estate in Alexandria.
Gateway Capital co-founder and chief investment officer Peter McDonald said he had never witnessed such low vacancy rates in the Australia industrial and logistics sector.
“This is driven by the supply constrained market, which is further being impacted as new developments are delayed, whilst demand remains strong,” McDonald said.
He said e-commerce continued to represent a large proportion of the occupier demand, evidenced by these users accounting for 46 per cent of all floor space leased in Australia in 2022.
“This is forecast to continue with e-commence penetration rates estimated to grow from 13 per cent currently to 17 per cent over the next four years.”
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Source: Thanks smh.com