ADELAIDE INDUSTRIAL MARKET Adelaide prime industrial market indicators Inner West Inner North Outer North Inner South Outer South Net face rent ($ sqm) 130 113 100 115 90 Incentive (%) 7.5 7.5 9.0 7.5 11.0 Yield (%) 5.0 5.3 6.0 5.3 6.8 Capital value ($ sqm) 2,600 2,132 1,666 2,170 1,323 South Australia was relatively sheltered from economic impacts derived from the pandemic and experienced a solid recovery over the last couple of years. A change in South Australia’s state government last year has resulted in an increased focus on health spending, providing a positive boost for public demand growth. Adelaide based defence programs are and will be significant contributors to medium term growth, and in combination with health spending, a large proportion of consumption is culminated by the South Australian government. In addition, South Australia’s exposure to manufacturing supports its economic outlook, especially with a large technological focus and onshoring of supply chains. The leasing market has benefitted from the recent improvement in South Australia’s economic growth, and enquiries for industrial property in Adelaide were robust last year. However, actual take-up was below the long run average, constrained by low vacancies amongst existing buildings. Central to occupier demand in the second half of 2022 were the manufacturing and logistics industries, followed by the growth in mining and e-commerce. Recent leasing deals included the South Australia Police leasing 5,300 square metres at 26 Williams Circuit, Pooraka. A further 7,310 square metres was leased to an office supplies company at 71-79 Morphett Road in Camden Park. Adelaide’s main precincts experienced strong rental growth in the second half of 2022. Leasing incentives displayed some falls, reflecting vacancies falling below 1%. Incentives were particularly low in the Northern precinct where industrial space is the highest in demand. Average prime rents ranged from $90 square metres in the Outer South to $130 square metres in the West. Secondary rents experienced growth throughout 2022 and now average $77 per square metre. This rise in demand can be attributed to increased interest in the Inner North, Outer North and Outer South precincts, with greater availability of product, and a lower rental rates for the latter two. Land values growth slightly eased, whilst maintaining their upwards trend, in the second half of 2022. This is likely related to low industrial supply keeping prices high. Land value growth was sustained in the Outer North, Outer South and in the typically expensive Inner North regions. Key drivers of this strong growth have been influenced by the progression of the North-South Corridor (motorway) along with demand from owneroccupiers buying sites for new purpose built premises. The extent of increased demand for land has not only resulted in price increases but also greatly reduced land availability. Leasing market 18 Industrial Market Monitor | 1st Half 2023
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