THE Adelaide industrial property market has already adjusted to the demise of the car manufacturing sector and offers superior returns compared to other capital cities, according to Colliers International.
Speaking at the Australian Property Institute South Australia State of the Market, Colliers International’s associate director Kate Gray said the industrial vacancy rate has decreased to 3.5% as at February 2017 compared to 5% in March 2016.
The outer north market (2,115,187 sqm) is the tightest with a vacancy rate of 1.5% down from 2.5% in March 2016. The inner north (3,503,532 sqm) decreased from approximately 6% to 4% and the south (724,899 sqm) also declined from more than 6% to approximately 4.2%.
The west (1,060,936 sqm) was the only market to remain relatively unchanged with vacancy rates falling from 5% to approximately 4.9%.
Gray said the defence sector is set to spend over $90 billion in South Australia with contracts to build air warfare destroyers, patrol vessels and the submarines.
“We have Holden due to close in October 2017 but the market has adjusted already. The Adelaide industrial market is positive surrounding the defence contracts and there are requirements in the marketplace for space,” Gray said.
“For space requirements over 5,000 sqm, you are looking at a new build because the vacancy is so tight and there is a lack of stock,” she added.
According to Colliers, under 50,000 sqm of new supply was added in 2016 and approximately 80,000 sqm is slated for 2017 and falling again to approximately 40,000 sqm in 2018.
It has been a decade since Adelaide has witnessed a surge in supply, with 200,000 sqm entering the market in 2007.
In the investment market, Gray said sales volumes have been low due to a lack of offerings. At the same time, she noted that “enquiry activity has improved in the last quarter,”
According to Colliers, around $130 million worth of industrial properties changed hands in 2016, down from $200 million in 2015 and approx $330 million in 2014.
“Certainly appetite for assets is improving and there is an increased depth in the buyer pool, but there is a lack of stock,” she continued.
Gray said investors are taking notice of Adelaide’s industrial market due to higher yields.
She noted that the average yield gap between Adelaide and Sydney/Melbourne is around 150 basis points.
According to Colliers:
- The outer north prime and secondary yields are 8.20% and 10.75% respectively
- Inner north prime and secondary yields – 7.88% and 10% respectively
- West prime and secondary yields – 7.20% and 8.80% respectively
- Inner south prime and secondary – 7.63% and 9.50% respectively
- And outer south prime and secondary – 9.38% and 9.50% respectively
“It is a very good investment compared to Sydney,” Gray said.
