The ASX dividend stock Centuria Industrial REIT (ASX: CIP) is one of the leading real estate investment trusts (REIT) on my radar.

The last three years have been a rough period for the REIT sector because of high interest rates. This economic environment has increased the cost of debt, impacting rental profits. High interest rates are also a headwind for property values.

I believe the valuation pain suffered by this ASX dividend stock now makes it an appealing buy. That's why I recently invested in the industrial property owner for my portfolio. There were a few different reasons for that investment, which I'll discuss below.

Attractive valuation

I like investing in growing businesses at good prices, so it's exciting when a share price falls significantly.

The Centuria Industrial REIT share price has dropped by 32% since 31 December 2021, which I think is a very appealing decline.

The ASX dividend stock's properties are regularly independently valued, giving investors some comfort about the REIT's stated underlying value. This is measured by the net asset value (NAV), which was reported as $3.87 at 30 June 2024.

At the current Centuria Industrial share price, it's trading at a 27% discount to the NAV for FY24.

Demonstrating strong underlying growth

Some REITs have faced headwinds in the last few years. Office buildings are contending with the work-from-home shift, while shopping centres have faced the impact of e-commerce.

The Centuria Industrial REIT is benefiting from several tailwinds, and it has explained how those trends are helping.

First, increased e-commerce adoption. Each additional $1 billion of Australian online sales requires an estimated 70,000sqm of logistics space. Australian e-commerce sales are expected to increase by $15 billion by 2027.

Second, population growth, as a whole, can help demand—around 4.5 sqm of Australian industrial space is required per person. According to Centuria, the net migration expected by 2025 would require around 4.5 million square metres of industrial space.

Third, Centuria points to the onshoring of production and assembly and the growing demand for fresh food and pharmaceuticals, which increases the demand for industrial space.

Finally, the rapid growth of generative AI-related industries, cloud, content and gaming is helping increase data centre demand.

All of these trends are driving rental income. The ASX dividend stock reported that in the first quarter of FY25, it saw a 54% jump in rental income for new leases signed compared to the old lease. This can help the business achieve rental profit and distribution growth in FY25 and beyond.

Good starting yield

The business is expecting to generate funds from operations (FFO – net rental profit) of 17.5 cents per security and pay a distribution of 16.3 cents per security in FY25.

This distribution guidance implies the ASX dividend stock expects to pay a distribution yield of 5.8% this financial year, which I believe is an appealing starting point.