Last year’s federal election and the change of government provided a positive boost for the Australian Capital Territory’s economy moving into 2023. The labour market is 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 several $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 medium to long run, the territory should experience a relatively robust recovery, underpinned by population growth as migration flows normalise. However, momentum will be dampened after the 2023 financial year by the inevitable fall back in government spending as the pandemic is controlled. Overall, we forecast solid SFD growth for the 2023 financial year, before easing back through the 2024 and 2025 financial years, 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 27 Industrial investment remained constrained in Canberra last year due to the lack of quality institutional grade assets offered to the market. The value of most assets sold sat between the $1.5 to $2.5 million mark, with few assets exceeding this value. Amongst the highest selling assets was 2 Paspaley Street, Hume, a 4,060 sqm warehouse, which sold for $11 million and a 3,662 square metre warehouse located at 110 Tennant Street, Fyshwick, which sold for $7.3 million. Additionally, the 1,425 square metre Mitchell Commercial Centre located at 53-55 Heffernan Street was sold in Q4 2022 for $3 million, a rarity considering an industrial warehouse sale above 1,000 square metres had not occurred in Mitchell since late 2020. Indicative yields on prime assets were little changed in the first half of 2022 but started softening un the second half of 2022. Finishing the year around 25 to 50 basis points higher at an average 6.0% across the precincts. However, given the lack of benchmark sales, it is hard to confirm precisely where yields sit. Even so, smaller buyers are dropping out of the market, decreasing the already limited competition for assets. Investment market Industrial Market Monitor | 1st Half 2023
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