Adelaide Commercial & Industrial Market Update – October 2019

September 23, 2019

The Adelaide industrial market remains relatively buoyant on the back of unprecedented expenditure on infrastructure and the growth of industry sectors including defence, advanced manufacturing and logistics (e-commerce).
In addition to the projects that are already underway, we have witnessed improved levels of confidence in the fundamentals of the market following announcements for further expenditure in defence, road infrastructure along the North-South corridor and also new industries including space, mining and energy.

Leasing demand has risen steadily over the past 12 months for existing buildings while new development activity is now at levels unseen since prior to the GFC. The increased take-up and resultant lack of quality stock available in the market is fuelling developers to start considering speculative development to meet the demand.
Pre-commitment and new construction opportunities are showing no signs of slowing down with a series of new mandates in the market while many new buildings are currently under construction, including Metcash, Drakes, Tailored Solutions and the recent completion of Sigma Pharmaceuticals to name a few.
Rentals for prime office warehouse accommodation in the inner north have stabilized and experienced some growth while incentive levels have reduced to approximately 10%.

Properties being offered with vacant possession continue to be sought after by the market who continue to take advantage of the low interest rate environment coupled with lower acquisition costs through the abolition of stamp duty in 2018.
Investment sales activity has skyrocketed 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 nearing completion at the end of 2019. This will provide a faster connection (a handful of minutes) 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 connected 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