AustralianSuper grows logistic exposure with New Zealand debut

The $150bn superannuation fund has made its first real estate investment in New Zealand, driven by plans to grow its global logistic exposure.

AustralianSuper, the country’s largest superannuation fund will develop a NZ$500 million ($334 million, €300 million) prime logistics estate in Auckland with logistics operator LOGOS.

This is AustralianSuper’s first property investment in New Zealand. The investor will fund the additional purchase of 14 hectares of land and full development of 24 hectares of the Wiri Logistics Estate in Auckland, alongside Sydney-headquartered LOGOS. The latter initially bought 10 hectares of the site in July 2018 and kicked off construction in April this year, according to the company.

“We are certainly investing in this development with a long-term view in mind. We are a believer in the sector, and we are a believer that the sector has a long way to go in terms of maturity in New Zealand. It is also a very healthy investment market,” said Darren Searle, LOGOS’s head of Australia and New Zealand.

AustralianSuper’s real estate portfolio is mostly invested in core and develop-to-core assets, with 60 percent in Australia, 20 percent in the US and the remainder in UK and Europe. With less than 10 percent of its portfolio comprising logistics investments, Bevan Towning, the fund’s head of property, told PERE that the fund wants to increase exposure in the sector globally.

Towning said AustralianSuper has taken a long-term view on the New Zealand market with this new development. He described the market as an attractive one for real estate, given the current slow vacancy rate, limited supply of industrial assets and a strong demand from tenants.

The return forecast for this project is similar to returns for a similar investment in Australia, according to Towning. Average prime yields in Sydney’s industrial sector stand at around 4.82 to 5.25 percent, while prime average yields in Auckland are between 4.7 percent to 5.7 percent, according to a 2019 Colliers report.

Chris Dibble, research and communications director at property services firm Colliers, told PERE demand from offshore purchasers remains high for New Zealand property, across different sectors, given its benign tax rule for property investment, transparency, and strong economic and property fundamentals. The industrial vacancy rate across all sectors in Auckland is 1.5 percent for around 129 million square feet of space, according to Colliers. Meanwhile, rents for newly-built warehouses is estimated to be around NZ$130 per square meter or more.

However, Dibble also pointed out that the development margins remain tight based on increasing construction costs and high land values.