- Industrial property supplies have diminished due to rapid growth in Australian businesses
- Victoria is seeing increased development, particularly in new warehouses sites
- Queensland is a lessor-dominated market
Growth across the Australian industrial property sector has been principally driven by the expansion of logistics and the heightened demand for high-quality and efficient industrial facilities.
E-commerce has also been a growing trend, with retailers and logistics both seeking out larger warehouses and distribution centres to store and manage stock.
The Herron Todd White (HTW) pointed out in their May Month in Review of the commercial property market noted there was particular interest for industrial property in Sydney, Brisbane and Melbourne.
Record year for development completions in Melbourne
The completions are a materialisation of the investments made into industrial during 2020 and 2021, said HTW Director, Nick Michael.
Trends in developable lands will also be one to watch, as Michael notes that due to the changing and higher-quality requirements of businesses, older warehouses are simply not up to scratch.
“Whilst the idea of rebuilding warehouses in a booming industrial sector may appear to be somewhat counterintuitive, warehouse owners have indicated that old buildings just aren’t meeting the requirements of tenants.
Automation and sustainability are on the wishlist, with some older assets also only offering sub-11 metre heights, while new style warehousing can be 15 metres high and hold 40% more product on the same footprint.
“It is certainly going to be interesting over the coming months to see whether this trend continues when more developable land becomes available. With the continual rise of holding and building costs and inflationary pressures, we may see demand for new builds soften,” added Michael.
Melbourne’s Industrial property supply pipeline
Notable developments currently underway in Melbourne include the $30 million Perri Project in Port Melbourne, and M2 Industry Park in Dandenong South.
Brisbane a lessor-dominated market
Rental growth for both prime and secondary accommodation continues to surge. HTW Valuer, Loughlin Batch, said the rental growth, in combination with reduced incentives on offer, shows a “lessor-dominated market driven by the lack of available stock.”
Among other market trends, Batch noted industrial transaction volumes have slowed across the first quarter of this year, there is a mismatch between buyer and seller expectations, a stable owner-occupier market, and:
“The investment market has been the hardest hit as a result of the RBA’s rate rises.”
Loughlin Batch, HTW Valuer
“Anecdotal evidence from leading agents within the Brisbane industrial market have reported signs that investment yields have softened from 50 to 100 basis points.
“We note that a large amount of the transactions settling in the first quarter of 2023 were predominately negotiated towards the end of 2022 and as such, the extent of this yield softening is yet to be reflected in the current market,” added Batch.
Brisbane’s Industrial property supply pipeline
The Gold Coast has experienced development primarily in strata industrial complexes, according to the May report.
Examples include Bundall Base which offered 16 self-storage warehousing units that fetched between $5,500 to $6,000 per square metre.
Land price growth has been substantial in recent years, noted HTW Director, Ryan Kohler.
“… serviced lots are now typically priced at $550 to $600 per square metre, with availability very low.
“A high exposure lot at the entry to the Yatala Logistics Hub recently sold and settled for $617 per square metre of usable land (circa 6000 square metres),” added Kohler.
