HOBART Hobart prime industrial market indicators Hobart Net face rent ($ sqm) 200 Incentive (%) 2.5 Yield (%) 5.8 Capital value ($ sqm) 3,448 The latest economic data shows Tasmania’s economy grew at a solid pace in Q3 2022 after lacklustre State Final Demand (SFD) gains in the first half of 2022. Even so, for 2022, SFD increased at a modest 1.5%, well down on 2021. Recent growth in the state was helped by spending on tourism and travel and a pick-up in dwellings investment as the construction industry works its way through supply chain disruptions. The states greater exposure to transport costs caused it to struggle with higher fuel costs, dragging on growth last year, but through it all the labour market was solid, ending the year with a 3.6% unemployment rate. Patterns in the economy have played out in industrial property activity. Enquiry levels are healthy across the precincts (including Derwent Park, Kingston, Cambridge and Mornington), but nowhere near the pace seen in 2021. Tenants seem to be taking more time to make decisions, cautious about the economic uncertainty. Owner occupier activity has quietened since the middle of last year, reflecting a market offering more choice amongst existing buildings for tenants. Of those looking for space, there are no standout sectors, but demand from companies servicing the local population is evident as is upgrader activity to newer more efficient premises. In addition, it appears that the trend towards storing higher inventory levels has passed with supply chain disruptions easing. Overall, vacancies amongst industrial properties rose during the second half of 2022 as new supply came online but remain relatively low. In response to the tightness in the occupier market, a phase of new industrial property supply is underway or has been recently finished. Most new supply is focused in unit estates in Cambridge and to a lesser extent, Brighton. Few projects are greater than 1,000 square metres in size for individual occupants. Amongst the largest projects recently finished was a circa 5,000 square metres warehouse pre-leased to Sigma Healthcare on Greenbanks Road, Bridgewater. We are also aware of four larger projects (for a combined 7,000 square metres) recently finished in Cambridge. Recent approvals data support the recent increase in industrial property supply. Over the year to November 2022, total approvals across Hobart were $46 million, a level above the long run average. Activity was dominated by warehouses. Low vacancies pushed average rents higher over the first half of 2022, for both prime and secondary space, where they stabilised in the second half of 2022. Higher quality space is leasing at an average $200 per square metre, up from $180 per square metre at the end of 2021. Secondary space is currently leasing within a band of $160 to $180 per square metre, reflecting an average $170 per square metre (significantly higher than 12 months ago). Leasing incentives do not play a significant role in Hobart’s industrial property market at present due to the high proportion of private owners. Most owners are securing leases incorporating no incentives, but some are having to offer 5% as vacancy rates start to rise. Leasing market 33 Industrial Market Monitor | 1st Half 2023
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