In Response to Chagsys straw about GMG and CIP.
GMG and CIP are very different propositions. GMG is a global developer & manager of industrial assets who also hold a minor stake in the assets they manage/develop. They are a fund manager.
CIP is a fund focusing soley on investing in industrial properties in Australia. Whilst the WACR is very slim it is still at a decent spread compared to Goverment bonds when compared with other industrial assets globally.
Rising interest rates are definenlty a concern and would undoubtadely impact the WACR for CIP's portfolio if they rose a material amount. GMG would be impacted even more severely as they have operating leverage as well as exposure to the assets themselves. GMG gets paid to manage and develop these assets and decreasing valautions would really hamper earnings due to lower development and management income.
That being said I think the rents produced by industrial assets have a long way to run and will offset rising rates. My reasoning is as follows:
The economic utility to a consumer provided by in person shopping/consumption versus online shopping and consumption is narrowing at a fast rate. Whilst in person consumption will always command some sort of premium, the gap in rents produced by industrial assets compared to retail assets does not reflect the gap in consumer utility offered to consumers by the two assets in my opinion.
Going forward when a retailer is faced with the decision of how to split their leased space between retail (think shopping centre) and warehouse, they are going to be downsizing their retail footprint which costs them $1,000 psqm and upsizing their warehouse and online footprint which might have an all in cost of $200 psqm. Supply and demand will mean that industrial rents rise much faster than inflation whilst retail rents go nowhere, if not down.