0 20 40 60 80 -10 -5 0 5 10 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 % annual change $ million Forecast Source: ABS State final demand (left axis) Total approvals (right axis) Hobart’s industrial property investment market was characterised by strong investor interest in 2021, which slowed through last year as interest rates rose. No major investment sales were reported during the first half of 2022. However, a notable sale of a 1,370 square metres warehouse at 229 Kennedy Drive, Cambridge occurred for $2.8 million. Industrial property yields will soften in Hobart, but there is no transactional evidence as yet to support this. As such, it is difficult to be confident about where yields sit in Hobart. We surmise prime industrial yields remained unchanged during 2022 at an average 5.8%. Our view is that the upswing in Tasmania’s economy seen through 2021 has run out of steam and will lose momentum this year and next. Tasmania’s post-COVID recovery has relied heavily on government support; the withdrawal of very easy fiscal settings will be a significant headwind to growth. Further, demand for the state’s high value produce is being challenged by trade tensions with China (a major export market), although the majority of exporters have managed to find alternative markets. On the positive side, funding from the Hobart City Deal will go some way to placing a floor under the pull back in government spending. Meanwhile, public investment in road and bridge upgrades is set to provide some support this year before fading. Several major projects are expected or currently underway, including the New Bridgewater bridge and the Hobart to Sorrell Corridor upgrade. In addition, the Macquarie Wharf redevelopment (when completed) will be a positive for the economy by improving access for freight and cruise ships. Approvals data points to above average levels of new industrial property construction activity in the near term and more warehouse unit estates are committed to proceed based on presales in Cambridge this year. Over the medium term, the current undersupply of industrial property will ease as rising supply meets a weakening demand as Tasmania’s economy slows. Overall, there is sufficient industrial zoned land in the pipeline to meet any likely level of demand. This will help moderate rental growth and property prices in Hobart’s key industrial precincts over the medium term. As in other markets, yields will start to soften this year as the rising cost of debt flows through to a repricing of assets. That means the likelihood of a moderate setback to capital values unless rental growth offsets higher yields. Investment market Leasing and investment market outlook 34 Hobart demand and industrial building approvals Industrial Market Monitor | 1st Half 2023
RkJQdWJsaXNoZXIy MTI3ODI1