INSIGHTS | Seizing the opportunity in Australia’s industrial real estate market

INSIGHTS | Seizing the opportunity in Australia’s industrial real estate market

Seizing the Opportunity in Australia’s Commercial Real Estate Market

The Australian industrial real estate market has undergone significant expansion in recent years. While there has been a slight moderation in momentum during the second quarter of 2022, this presents a compelling opportunity for potential investors to consider entering the commercial real estate landscape in Australia. Below, Research conducted by JLL in their Q2, 2023 report shows a comprehensive overview of key statistics and trends in Adelaide, Melbourne, and Sydney, highlighting the attractiveness of these cities for commercial investment.

Adelaide: Steady Progress with Promising Prospects

Adelaide’s industrial sector has displayed remarkable resilience, experiencing a notable increase in leasing activity, reaching 34,620 sqm in the recent quarter. An impressive 82.2% quarter-on-quarter surge in occupier activity underscores the rebounding demand for streamlined warehouse spaces. Notably, the Inner West/East precinct demonstrated a robust 10.0% quarter-on-quarter rise in average land values, positioning it as a prime destination for astute investors. While investor demand has experienced a slight moderation, noteworthy transactions surpassing AUD 5.0 million underscore ongoing market interest.

  • Quarterly gross take-up (≥5,000 sqm): 38,880 sqm
  • Prime yearly rental growth in Inner West East: 12.0%
  • Under Construction: 120,650 sqm
  • North West Prime Yield Range: 4.00%–5.00%

Melbourne: Navigating Challenges with Steady Performance

Melbourne’s industrial real estate market recorded a decrease in leasing activity, totalling 285,100 sqm this quarter. However, this figure remains 22% higher than the 10-year average, highlighting its resilient performance. The West precinct continues to attract occupiers, accounting for 76% of the quarterly total. Despite a 23% quarter-on-quarter supply decrease, a robust forward supply pipeline for 2022 indicates a solid foundation. Notably, average land values demonstrated considerable growth in the West and North precincts, illuminating the region’s investment potential.

  • Quarterly gross take-up (≥5,000 sqm): 285,100 sqm
  • South East Melbourne quarterly prime rent growth: 3.7%
  • Under Construction: 800,000 sqm
  • Melbourne West Prime Yield Range: 3.50%–3.75%

Sydney: Resilience in a Competitive Landscape

Gross take-up in Sydney’s industrial market experienced a moderate dip, registering 137,000 sqm in 2Q22. However, this downturn seems to stem from market constraints rather than genuine demand reduction. The groundbreaking completion of a 207,000 sqm distribution facility in Horsley Park highlights the persistent demand for modern facilities. Notably, the Outer Central West precinct recorded a remarkable 15.1% yearly rental growth. Investment volumes exhibited a minor retreat but remained aligned with recent historical trends, showcasing enduring investor confidence.

  • Quarterly gross take-up (≥5,000 sqm): 137,000 sqm
  • Outer Central West Prime Yearly Rental Growth: 15.1%
  • Under Construction: 623,800 sqm
  • Outer Central West Prime Yield Range: 3.13%–3.38%

Seizing the Opportunity: A Fortuitous Time for Investment

The prevailing dynamics in the Australian commercial real estate market, especially in the vibrant cities of Sydney, Melbourne, and Adelaide, present a compelling rationale for investment. While market momentum has slightly moderated, the growth trajectory, coupled with limited supply, sets a promising stage for investors seeking stable returns and potential long-term growth. The industrial property landscape in Australia is poised for robust expansion, making this juncture an optimal time to capitalise on the attractive prospects offered by commercial real estate investment.