Industrial building approvals
The industrial sector continues to boom. Image – Canva
  • Industrial investors based in the capital cities are now being drawn to the regional markets, despite moving up the risk curve
  • Regional industrial capital values grew by an average of 22.2% during FY 22 for the prime market
  • The eastern coast of Australia is set to benefit from $90 billion of infrastructure

Industrial investors based in the capital cities are now being drawn to the regional markets, despite moving up the risk curve.

Data from Colliers show that regional industrial capital values grew by an average of 22.2% within the prime market across FY 2021-22. Gold Coast (26.4%), Newcastle (25.5%) and Toowoomba (24.2%) outperformed, beating the capital city average of 23.6% too.

Prime yields across the East Coast regional centres are 5.4% as of June 2022, with prime yields in the capital cities averaging around 4%.

These favourable conditions, such as boosted capital values and yield compression, are supported by an average prime rent increase of 9.6% across East Coast regional centres for the last financial year.

This indicates a newfound status of the regional industrial market, according to Like Crawford, Director, Research at Colliers.

“While most of the spotlight has been on the record performance of capital city industrial markets, many regional markets around the country have outperformed their respective capital cities, led by higher levels of population growth and shifting business preferences.” Mr Crawford said.

“Regional industrial markets are also well placed to weather interest rate headwinds and buffer rising fund costs, given the higher yield spread than capital city markets.”

Tightened supply

The growth of these regional industrial markets is set to continue to be driven by elevated demand and low vacancy. Available supply across the assessed markets has declined to about 110,000 square metres as of June 2022 (for buildings greater than 3,000sqm). In June 2021, this was 260,000 sqm.

Currently, there are no leasing options above 3,000 sqm in the Ballarat and Sunshine Coast markets.

There is limited new supply on the horizon, particularly for buildings that are 3,000 sqm and above. Colliers forecast rental growth of 7.5-10% over the next year.

This has resulted in occupiers being directed to the pre-lease market, or even buying the land themselves.

“With strong underlying fundamentals, the momentum from 2021 has continued into 2022, supported by population growth, the continued growth of e-commerce and the movement of businesses from Brisbane,” said Daniel Coburn, Director of Industrial, Colliers Gold Coast.

Trent Roberston, National Director of Industrial, Colliers Newcastle, added that Newcastle is seeing businesses ‘race’ to execute leases for the first time, leading to a climb in rents.

“Infrastructure investment and buoyant local economic conditions have continued to support industrial demand across the Newcastle and Hunter Region, however, a lack of stock for lease and sale is restricting enquires and mandates being met,” he said.

Toowoomba is also set to benefit from planned infrastructure, such as the 12,000 sqm assembly plant at Wellcamp Airport by Boeing.

“The Toowoomba industrial market has been a standout performer in the region in recent years and this is set to continue given recent investment,” said Dan Dwan, Managing Director, Colliers Toowoomba.

Regional markets along the east coast will also benefit from a $90 billion infrastructure pipeline. This includes the $10 billion Inland Rail project.

“The new Inland Rail will challenge the status quo of the industrial market on the Australian East Coast, expanding and connecting the supply chains across Melbourne and Brisbane to international and other domestic markets.” Mr Crawford said.

“As it stands in mid-2022, fundamentals for the industrial sector remain solid, supported by a record level of infrastructure investment, supply chain volatility which has forced occupiers to hold more stock locally and elevated levels of online retail expenditure.”




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