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Demand for industrial property surges driven by low rates and COVID-19

November 9, 2020

Industrial assets are experiencing escalating demand as SMEs opt to invest in their own premises.

Raine & Horne Commercial announces the launch of its Spring/Summer 2020 edition of Commercial Insights, providing an in-depth look at the commercial property market across Australia.

Commercial Insights confirms that across the nation, industrial assets are performing at exceptional levels as unprecedented demand jostles with increasingly tight supply.

On the demand side, historically low interest rates are seeing a growing number of business owners take the opportunity to invest in their own premises, a strategy which can often be more cost effective than leasing.

Angus Raine, Executive Chairman Raine & Horne Group, says, “It’s testimony to the demand for industrial property that across the Raine & Horne Commercial network, our experts have conducted a number of off-market sales in recent months, and properties sold at auction are achieving results well above the reserve price.

“Part of the appeal of industrial property is the flexible, multi-use nature of warehouses. In addition, industrial assets are consistent with the types of businesses that have thrived during the pandemic, and surging e-commerce activity has underpinned burgeoning demand for logistic warehousing needs. Elsewhere, we have been inundated by enquiries from trade-based businesses seeking industrial space under 500 square metres,” said Mr Raine.

As a guide to the strength of demand, Raine & Horne Commercial Brisbane South successfully sold five of six listings at auction in August – despite the inability of interstate investors to view properties in person. Recent sales in the area include $2.85 million for a 1,500 square metre industrial office/warehouse in the Banyo Industrial Precinct, and an industrial property in Virginia, which sold for $2.4 million. In Brisbane’s north, a 2,330sqm warehouse/office in Rocklea sold at auction for $1.720 million. 

In Adelaide, Raine & Horne Commercial negotiated the sale of Park Holme four industrial units on four titles for $1.83 million on a yield of 6.8%.

On the supply side, the industrial property market is facing a retraction of stock following the conversion of many former industrial assets to residential properties, coupled with a lack of new industrial developments. Tight supply is leading to massive ‘per square metre’ (sqm) rate increases.

“We are seeing sale results of up to $1,200 per sqm in parts of Sydney’s western suburbs. And vacant land is no exception to price gains. Small industrial lots in Sydney’s Marsden Park recently came to market at $900 per sqm – land that would have listed at $450 per sqm just three years ago,” said Mr Raine.

Demand for industrial property is not restricted to state capitals. Infrastructure developments are driving demand across regional locations, with interstate investors often seeking high quality assets with reasonable weighted average lease expiry (WALE). As Commercial Insights reveals, investors seeking value can still find affordable entry points in locations such as Wagga, Tamworth and Mackay.

“For small to medium businesses, the current market offers an exceptional opportunity to achieve security of business premises with potential cost savings compared to leasing,” Mr Raine said.

“Investors, including self-managed super funds, can benefit too. Industrial assets are low maintenance, multi-use and offer a predictable cash flow, which is especially attractive given the sharemarket volatility seen in 2020,” offered Mr Raine. 

“Industrial property is definitely an asset class that is anticipated to see further demand in the years ahead, and Raine and Horne Commercial experts are well-placed to advise on the state of play in their respective markets across Australia,” concluded Mr Raine.

For a copy of the Raine & Horne’s Commercial Insights Spring/Summer 2020 click onto this link.