This article is from the Australian Property Journal archive
INDUSTRIAL investors are flocking from capital cities to growing regional markets, drawn in by soaring capital values and rents.
According to Colliers’ Regional Spotlight Industrial Report 2022, regional industrial prime market capital values have grown by an average of 22.2% over FY21-22, attracting capital city industrial investors.
“While most of the spotlight has been on the record performance of capital city industrial markets, many regional markets around the country have outperformed their respective capital cities, led by higher levels of population growth and shifting business preferences,” said Luke Crawford, director of research at Colliers.
The Gold Coast eclipsed the average with capital values growing by 26.4%, followed by Newcastle with 25.5% and Toowoomba with 24.2%, all beating out the capital city average of 23.6%.
Prime yields across East Coast regional centres compressed to 5.4% by June this year, with prime yields in capital cities averaging around 4.0%.
Yield compression and increased capital values were also supported by an average prime rent increase of 9.6% across East Coast regional centres over the same financial year period.
“Regional industrial markets are also well placed to weather interest rate headwinds and buffer rising fund costs, given the higher yield spread than capital city markets,” added Crawford.
Crawford also noted the heightened demand and low vacancy across the assessed markets, which have dropped to approximately 110,00sqm for buildings over 3,000sqm, from 260,000sqm in the year to June 2022.
In both the popular markets of Ballarat and the Sunshine Coast there are currently no available leasing options above the 3,000sqm market, with very little new stock coming up in this segment across all assessed markets.
“With strong underlying fundamentals, the momentum from 2021 has continued into 2022, supported by population growth, the continued growth of e-commerce and the movement of businesses from Brisbane,” said Daniel Coburn, director of industrial at Colliers, Gold Coast.
As a result, Colliers is forecasting rental growth between 7.5% and 10.0% in the next 12 months.
“Infrastructure investment and buoyant local economic conditions have continued to support industrial demand across the Newcastle and Hunter Region, however, a lack of stock for lease and sale is restricting enquires and mandates being met,” added Trent Robertson, national director of industrial at Colliers, Newcastle.
Meanwhile in Toowoomba, the growing market is well poised to benefit from upcoming planned infrastructure such as the proposed 12,000sqm assembly plant at Wellcamp Airport by Boeing.
“The Toowoomba industrial market has been a standout performer in the region in recent years and this is set to continue given recent investment,” said Dan Dwan, managing director at Colliers Toowoomba.
Likewise, along the east coast of the country, the infrastructure pipeline is set to support the industrial market, with $90 billion in planned projects such as the $10 billion Inland Rail project.
“The new Inland Rail will challenge the status quo of the industrial market on the Australian East Coast, expanding and connecting the supply chains across Melbourne and Brisbane to international and other domestic markets,” said Crawford.
“As it stands in mid-2022, fundamentals for the industrial sector remain solid, supported by a record level of infrastructure investment, supply chain volatility which has forced occupiers to hold more stock locally and elevated levels of online retail expenditure.”
