Raine & Horne Commercial

Andrew Brien CEO Raine & Horne Group InFocuswith AndrewBrien Focus on…industrial property Raine &Horne CEO AndrewBrien provides insights into the industrial propertymarket – andwhy it’s thriving. Industrial property has performed exceptionallywell this year, despite the tumult of COVID-19. But this is a success story that began long before 2020. Demand driven by low rates and e-commerce For a number of years, several factors have contributed to strong returns on industrial space. On the demand side, industrial property is well-positioned to benefit from structural changes in our economy. In particular, the growth of online retailing has created tremendous need for storage and logistic warehousing space. This demand is not concentrated in our state capitals. Amassive investment in infrastructure nationally is spreading demand for industrial space to regional centres. Sydney’s NorthConnex project for instance, is driving fresh demand for warehousing facilities on the Central Coast and further south in the Macarthur region. In addition, we nowhave the lowest interest rates since the Reserve Bank began collecting this data in 1959. It’s giving business owners (or their self-managed super funds) a golden opportunity to buy rather than lease their premises. As loan repayments are often below the lease costs on an equivalent property, businesses are seeing their cashflowbenefit fromowning industrial property. The Reserve Bank noted recently that it doesn’t anticipate increasing interest rates for at least another three years. This is giving investors and businesses reassurance over stable rates for some time to come. Supply remains tight On the supply side, we have seen constraint in the development of new industrial estates. Coupledwith the repurposing of industrial stock into residential housing, we are seeing a noteworthy lack of industrial stock. As more businesses invest in their own premises, tenants face a further tightening of industrial space to let, pushing down vacancy rates. With demand far outweighing supply, industrial properties that do become available for sale are typically being snapped up in highly competitive auctions. As Raine &Horne Commercial Parramatta note in this edition of Insights, this is pushing up ‘per square metre’ rates to as high as $1,200 in parts of Sydney’s west. The upshot is that for owner occupiers and investors alike, industrial property is definitely an asset worth adding to your portfolio. To benefit from steady yields and the potential for strong capital growth, at a time when interest rates are at historic lows, I urge you to speak with your Raine &Horne Commercial property expert to find the industrial property that lets you achieve your goals.