31 Momentum surrounding the federal election and commencement of the new Federal government’s first term in office provided a positive stimulus for the Australian Capital Territory’s economy this year. The labour market is also in good shape with a low unemployment rate supportive of consumption growth in the near term. Continued spending on major infrastructure, health and non-residential projects mentioned above along with a number of $100m+ road upgrades will help prop up activity and support demand for warehouse space from tradespeople and building construction firms. Additionally, the territory government is pressing ahead with their emissions reduction plan, with further funding allocated to the Big Canberra Battery project in the 2022-23 territory budget. This project will build on current works to develop a large-scale battery in Beard, with Fyshwick and Gungahlin identified as locations for Stream 2 of the Big Canberra Battery. In the long run, the territory should experience a relatively robust recovery as migration flows normalise and population growth resumes although, momentum will be dampened after the 2023 financial year by the inevitable fall back in government activity as the pandemic is controlled and related activity is unwound and the focus turns to budget repair. Overall, we forecast solid economic growth for the 2023 financial year, before easing back through the 2024 financial year and the 2025 financial year, ultimately taking some of the momentum out of the leasing market. Hume and, to a lesser extent, Beard are expected to see the bulk of the new demand for larger industrial property. This is because both precincts offer land for businesses to expand. Mitchell will be constrained by the shortage of available vacant buildings and Fyshwick is effectively built out and can only accommodate occupant churn or redevelopment of existing premises. Leasing outlook Activity in the Canberra industrial investment market was constrained during the first half of 2022 by the lack of quality institutional grade assets offered to the market. Most of the sales activity in the first half of 2022 was focused on properties in priced below $5 million, with only a couple of sales exceeding this value. The largest recent reported sale occurred earlier this year, with a 4,300 square metres warehouse at 11 Sheppard Street in Hume selling for close to $9 million, reflecting a yield of 6 per cent. Indicative yields on prime assets were little changed in the first half of 2022 averaging around 5.8 per cent across the precincts. However, given the lack of benchmark sales, it is hard to confirm precisely where yields sit. Investment market Industrial Market Monitor | 2nd Half 2022
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