Adelaide Commercial & Industrial Market Update – February 2020

February 24, 2020

The underlying fundamentals of the Adelaide industrial market remain very consistent year on year. Advances in infrastructure through State and Federal expenditure has been the backbone of the Adelaide industrial economy which continues to deliver more efficient transport corridors and bring regional and interstate markets closer to Adelaide.

Good levels of demand for industrial property continues however the availability of quality offerings remains a challenge for the market. As mentioned in our previous report, developers must seriously consider speculative development to meet the demand and add quality levels of supply to the market, especially within the inner western and north-western markets.
A series of pre-commitment mandates have been filled in recent times while another group of opportunities appear close to being finalised. This will result in fresh construction activity, predominantly throughout the inner west (airport), inner north (Gillman/Wingfield) and outer north (Direk). Again, developers should start to consider speculative development on the back of specific tenant mandates in order to provide additional supply to the market. Larger distribution centre assets are available in Edinburgh at very attractive rental rates and strong levels of incentives are being offered to entice tenants. With the opening of the Northern Connecter in February, this region is only a handful of minutes from the inner north and is set to provide significant savings and affordability to tenants. Rents remain stable across all markets while incentives have reduced (where supply is significantly less than demand).

Again, low stock levels are restricting activity levels throughout the vacant possession and investment sale market.
Properties being offered with vacant possession continue to be sought after with low interest rates and low acquisition costs driving activity. Investment sales activity remains strong with record sales being achieved over the past 12 months. Private high net worth groups, syndicates and interstate investors are actively seeking larger scale opportunities and are attracted to Adelaide given the stability of the market, lower entry costs and the higher return profile.

Land acquisition in the previously under-utilised outer northern market is experiencing one of the more stunning growth spurts with the Northern Connector road project opening in February 2020. This will provide a faster connection to the traditional inner northern market for at least 50% of the land cost. Owner-occupiers and developers have been taking advantage of this opportunity to acquire affordable and serviced land. Land within the inner northern markets continues to be hard to find and tightly held resulting in more prospects needing to consider land further afield.

Steve Smith
Leedwell Property