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Centuria Industrial REIT (ASX: CIP), Australia's largest listed pure-play industrial fund, has completed $188 million of asset divestments at an average 17 per cent premium to book value since 31 December 2025, capitalising on intense investor demand for urban infill industrial property amid persistently constrained supply.
The sales were disclosed in CIP's third-quarter FY26 operating update released today, which also revealed year-to-date re-leasing spreads of 36 per cent, a sharp acceleration from the 20 per cent recorded at the half-year mark.
The quarter's standout transaction was the sale of 50–64 Mirage Road in Direk, South Australia, for $50 million - a 33 per cent premium to total project costs - delivering an estimated internal rate of return of 25 per cent.
A second major settlement saw 680 Boundary Road in Richlands, Queensland, change hands for $38 million at a 23 per cent premium to book value.
Since FY23, the fund has now divested $460 million of assets at an average 12 per cent premium, up from the $270 million at an 8 per cent premium reported at the half-year results in February.
CIP fund manager and Centuria's head of listed funds Grant Nichols says the results highlight a "disconnect" between CIP's trading price and direct market pricing for infill industrial assets.
“The strong divestment metrics achieved during the quarter more than reinforce CIP’s net tangible assets, and considering CIP’s current trading price, further highlights the disconnect to direct market pricing," says Nichols.
“Looking ahead, we foresee the domestic infill industrial market’s supply-demand imbalance to persist with limited construction of new warehouses coupled with consistently high occupier demand as tenants look to strengthen their delivery times and reduce transport costs.
“Current macroeconomic uncertainty, resultant of the Middle East conflicts and global oil constraints, is impacting inflation and construction price pressures. These factors are expected to curtail future industrial market supply.
"The value of high-quality, existing infill industrial assets is expected to increase as the disconnect to replacement cost continues to escalate.”
The fund's portfolio is 85 per cent weighted to urban infill markets, where land scarcity and planning constraints limit new development.
"During this quarter, we have illustrated the merits of this strategy by securing significant sales premiums and leasing success,” says Nichols.
CIP estimates average under-renting of 20 per cent across the portfolio, providing embedded rental reversion upside as leases roll to market rates.
During the third quarter, CIP leased 14,400 square metres across four deals.
The 36 per cent year-to-date re-leasing spread excludes capped rent reviews, cold storage renewals and a liquidation-related new lease, a broader set of exclusions than the half-year metric, which stripped out cold storage and capped rent reviews to arrive at a 44 per cent figure.
Broader market data from JLL for the first quarter of 2026 shows national industrial vacancy remains historically tight, ranging from 2 per cent in Perth to 5.8 per cent in Sydney.
While the upward vacancy trajectory is expected to continue, JLL notes the pace of increase is slowing as development completions moderate.
CIP reported half-year FY26 funds from operations of $57.3 million, or 9.1 cents per unit, and reaffirmed full-year FFO guidance of 18.2 to 18.5 cents per unit with a distribution of 16.8c per unit.
Net tangible assets stood at $3.95 per unit at 31 December 2025, and the fund expects gearing to reduce by about 3 per cent once remaining divestment settlements complete.
Portfolio occupancy sat at 95.7 per cent at the half-year, with a weighted average lease expiry of 7.1 years providing income security across the 85-asset portfolio.
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