ESR and Toll Group to Invest $285M in Sydney Distribution Centre

ESR and Australian logistics provider Toll Group have signed a deal to invest A$420 million ($284.6 million) to develop a new distribution centre at the industrial giant’s Westlink Industry Park in Sydney that will be Toll’s largest in the country when complete.

Starting with a project site that spans 10.8 hectares (26.7 acres), when complete the facility will yield 68,000 square metres (731,946 square feet) of space, inclusive of offices and ancillary amenities, with the Melbourne-based shipping firm set to lease the distribution centre for 10 years, ESR said in a release. The property is being developed for the core-plus ESR Australia Logistics Partnership II backed by Singapore sovereign fund GIC.

“ESR Australia’s partnership with Toll, a leader in the warehousing and logistics industry, represents a significant milestone while further advancing Westlink’s ambition of connecting businesses to the Australian market,” said ESR Australia CEO Phil Pearce.

In its own announcement, Toll said it will invest A$200 million into the project, which through use of automation advances will be able to dispatch 37 million items each year. The shipping firm linked the initiative to requirements from e-commerce platforms and omnichannel retailers for more flexible fulfilment options.

High-Tech and Green

Upon completion in September 2024, Toll’s new facility is expected to draw power largely from solar panels installed at ESR’s A$1.2 billion Westlink Industry Park in Kemps Creek, 52 kilometres (32 miles) west of the Sydney CBD.

By minimising waste and incorporating recycled materials, the Westlink facility will meet the requirements of a five-star rating under Australia’s Green Star Design and As Built certifications before targeting a six-star outcome, Toll said.

The latest project adds to Toll’s existing facilities within ESR’s portfolio in Australia, where the Hong Kong-based group has assets under management of more than A$12.7 billion.

Toll, which is majority-owned by state-backed Japan Post, also leases logistics space from Sydney-based Logos, a subsidiary of ESR, at properties in New South Wales, Queensland and Western Australia.

In 2019, Logos purchased a 15.2 hectare site near Sydney from Toll for an A$200 million project that would see Toll lease back a portion of the finished facility. The deal, executed under the $500 million Logos Australia Investment Venture fund with Canadian partner Ivanhoe Cambridge, marked Toll’s fourth project with Logos.

Across the Tasman Sea in New Zealand, a Logos joint venture with GIC acquired a 17.2 hectare site near Auckland from Toll in 2020 as part of another leaseback deal, with the partners later developing the NZ$250 million ($150 million) Logos Otahuhu Logistics Estate on the plot.

Automated Fulfilment

Toll sees the Westlink project as part of its efforts to expand its services to both retailers and consumers in Australia as shopping behaviour evolves.

“We’re seeing huge demand from our retail customers for fast, flexible warehouse solutions that meets the needs of Australia’s savvy online and retail shoppers,” Nick Brckovski, president for retail and consumer at Toll, said in the company statement.

The project will incorporate A$75 million in advanced automation, according to Toll, including automated picking stations that use machines to assemble orders and connected zone-routing stations that direct the flow of goods within the warehouse. “Our newest facility will give our customers fast, flexible fulfilment that integrates multichannel order management for immediate and accurate deliveries across all of Australia,” Brckovski said.

The company said that with major retailers showing interest in the facility, it expects the project to be fully leased before completion.

Dry Powder Down Under

The core-plus ESR Australia Logistics Platform II most recently picked up five income-producing Greater Melbourne properties for A$106.5 million ($73.5 million) last July. The group announced $410 million in commitments to the third vehicle in the series two months later.

ESR reinforced its commitment to Australia with October’s A$540 million ($352.6 million) first closing of the group’s second develop-to-hold logistics fund focused on the country alongside cornerstone investor GIC.

ESR Australia Development Partnership II, the follow-up to the 2020-vintage ESR Australia Development Partnership, targets a fund size of A$1 billion and aims to deliver premium, sustainable industrial estates with a human-centric design.

GIC had committed A$400 million to the first EADP, with ESR contributing an unspecified amount in return for a 60 percent stake in the venture. All of the fund’s equity has been allocated to eight projects — including ESR Horsley Logistics Park in Sydney, ESR Green Link Estate in Melbourne and Acacia Ridge Business Park in Brisbane — at an expected end value of A$2.6 billion.

Backed by shareholders including the Ontario Municipal Employees Retirement System, China’s JD.com and GIC, ESR manages $156 billion in total assets across Asia Pacific, Europe and North America.