Leasing market

1ST HALF 2016
>Firming yields have boosted
construction activity
> Leasing demand has begun to rise
> Large portfolio sales is leading to
a consolidation of ownership
1
Perth
Leasing market
Investment market
Supply
Page 25
ent
R
$96 psm pa
26
28
29
Yield 7.75%
Darwin
Page 43
Leasing market
Investment market
Supply
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Adelaide
Leasing market
Investment market
Supply
Hobart
Leasing market
Investment market
Supply
Note: Rent = average prime net rent. Yield = average prime yield.
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LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
Page 31
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Page 39
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ent
R
$195 psm pa
Yield 8.0%
ent
R
$111 psm pa
Yield 8.2%
ent
R
$100 psm pa
Yield 8.1%
About us
Brisbane
Page 19
Leasing market
Investment market
Supply
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22
23
Sydney
Page 7
Leasing market
Investment market
Supply
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10
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Canberra
Leasing market
Investment market
Supply
Page 35
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Melbourne Page 13
Leasing market
Investment market
Supply
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ent
R
$125 psm pa
Yield 7.2%
ent
R
$113 psm pa
LJ Hooker Commercial,
part of the LJ Hooker
group, is a national
network of commercial
real estate agencies
providing specialist
services to commercial
property investors.
Yield 7.0%
ent
R
$135 psm pa
Yield 8.6%
At LJ Hooker Commercial we are
quietly doing something amazing.
We are building on some very strong
foundations and a proud history. We
are passionate about commercial real
estate and our brand and we want to
take it to even greater heights.
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ent
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We are pushing the boundaries,
connecting, sharing, learning, creating
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customers at the centre of everything
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To learn more visit ljhcommercial.com.au
33
15 Quilpie Street, Fyshwick. LJ Hooker Commercial Canberra.
4
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
National Overview
Over the past three years, record low interest rates have increased the appetite for
industrial assets. The resulting competition has triggered a firming of investment
yields and led to an increase in industrial construction, rents, capital values and
land prices.
Developing for sale
The firming of yields helps improve
the financial feasibility of industrial
construction by increasing the end value
of a project, allowing developers to give
away all, or part of, the increase in the
form of higher incentives and/or lower
face rents.
This provided developers with a
chance to turn extensive landbanks into
cashflow-producing assets or saleable
commodities, safe in the knowledge
that prices would rise through the
process and that investors were waiting
for new product. However, soft demand
in some markets meant that developers
over-built.
Forecasting future demand
For now, yields are still firming, largely
because of low bond rates. But what
happens to yields if bond rates rise?
Unless there is a big shock to bond
rates, the transition is likely to be
relatively smooth.
Australian banks’ need to borrow funds
from overseas means our long bond
rates largely follow the United States’
lead. Already, our bond rates have
risen from the lows of early 2015 and
our forecast is for them to gradually
drift upwards for most of the next
three years.
Strength in industrial property
investment
Impact of bonds on yields
Higher bond rates will reverse the
impact of falling yields on financial
feasibilities. It means the end value of
a project will be lower and that higher
rents are needed to offset the fall.
Rents will not rise immediately and
there will be a period of slightly less
supply. During that period, vacancies
among existing stock will decline and
boost rental growth. Tenants who need
new space will find themselves with
little alternative but to go to the prelease market, while others will continue
to commit to new premises regardless.
Demand for industrial space will
slowly improve, but not everywhere
and not at the same time. NSW, in
particular, and Victoria offer the best
prospects in the near term, with
rising investment feeding through to
improved underlying demand.
Industrial property is a steady, real
asset, delivering a solid yield and
protection/hedge against inflation.
There is plenty of land in most
markets. Unless there are short-term
bottlenecks in servicing new estates –
or encroaching alternative uses – land
values will be relatively constant in real
terms. Similarly, construction costs
tend to rise in line with CPI inflation.
Together, improving demand and
low risk of oversupply means there
is little downside risk in industrial
markets. Construction costs will put a
floor under property values in tighter
markets, governed by “replacement”
costs. Accordingly, industrial property
is a relatively safe income proposition
and inflation hedge.
Australian industrial sales transactions
Australian industrial sales transactions
Billions
$5.0
$4.0
$3.0
$2.0
$1.0
$0.0
2007
Institution
2008
2009
Occupier/Developer
2010
Private
Syndicate
2011
2012
Other/unknown
2013
2014
2015
Source: LJ Hooker Research / RCA
5
Aerial
courtesy
of Airview
Online
– www.airviewonline.com
6 LJimages
Hookersupplied
Commercial
Industrial
Market
Monitor
1st Half 2016
Sydney
Sydney industrial market
The Sydney industrial property market
remains buoyant. Tenant enquiry has
picked up and demand for industrial
space is strong. Only rental growth
continues to be absent, however, this is
expected to change over the course of
2016. Building activity remains solid and
the weight of money chasing assets is
causing investment yields to firm and
prices to rise.
Sydney Outer West industrial market
Average prime
net face rent
$113 psm pa
Average
prime
incentive 10%
Average prime
capital value
$1,620 psm
Average
prime
yield 7.0%
77
Sydney
16 Pioneer Ave, Tuggerah. LJ Hooker Commercial Central Coast.
Leasing market
Demand for industrial space in the Sydney metropolitan area increased significantly
through calendar 2015. Net absorption nearly tripled, to around 700,000 square metres,
compared with the year before, falling just 10% short of its previous peak in 2004.
The combination of strengthening
demand and declining net additions
saw vacancy rates fall across the board
in 2015. For the metropolitan region as
a whole, we estimate that the vacancy
rate contracted from 3.7% at December
2014 to just 2.1% by the end of 2015,
the lowest level since 2007.
The strength of demand was
underpinned by solid growth in
the NSW economy, which is now
the second strongest among the
states. Demand for industrial space
continues to focus on warehousing and
8
distribution space, with the transport/
logistics sector being the main
source. Its main driver is supply chain
outsourcing and e-commerce, both of
which have experienced exponential
growth over recent years. Other
sources of demand were retailers,
wholesalers and manufacturers
performing their own warehousing and
distribution – including companies as
diverse as OfficeMax, Techtronics and
Fisher & Paykel. At the smaller end of
the market, strong population growth
associated with the South West Priority
Growth Area has lifted demand for
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
industrial units in precincts such as
Smeaton Grange and Gregory Hills.
Nonetheless, the decline did not
translate into any meaningful rental
growth. Despite a small uptick in
the second half of 2015, face rents
have been flat largely flat since 2008.
However, the tightness stalled the rise
in leasing incentives. Larger tenants
can still expect up to 10% of the value
of a lease for existing premises, while
tenants underwriting new construction
can expect 15+%, but effective rents
have stopped falling.
Leasing outlook
The outlook for space demand over the next three years is positive with above-average
net absorption forecast. The transport/logistics sector is expected to be the main
source of demand, underpinned by supply chain outsourcing, the rise of e-commerce
and the expansion of global retailers.
The area around the M7/M4
interchange will remain the most sought
after location for transport/distribution
until its stocks of zoned land run out.
Nearby Erskine Park remains popular,
although the short-term focus will be
on Greystanes, Marsden Park, Horsley
Park and Prestons.
Despite the strength of demand the
outlook for rental growth remains
modest. Our forecasts for rents assume
that supply will be able to rise to meet
demand over the next 12 to 18 months.
As a result, face rents are expected
to show moderate growth, although
leasing incentives should remain
stable. Declining vacancy rates among
existing stock has the potential to
underpin rental growth, but competition
among developers for pre-leases and
speculatively built premises will act in
the opposite direction.
Overall, our forecasts are for average
prime net face rents to grow by 5.5%
over the three years to June 2018.
The outlook for secondary rents is
similar to the prime market. Vacancies
are not substantially higher and most
of the expected stock withdrawals
concern lower grade premises. In the
unit market, the steady addition of new,
speculative stock will likely contain
rental growth as well, particularly in
the more active precincts. There will
be more pressure on rents in areas
threatened by conversion to other uses.
Chart 3:Outer
Industrial
and capital
Sydney
Outer Western region, 2004 to 2018
Sydney
Westrents
industrial
rentsvalues,
and capital
values
Forecast
$/psm
$/psm
100
1,400
90
1,200
Values (RHS)
80
1,000
Net stated rents
(LHS)
70
800
60
2004
2005
2006
2007
2008
2009
2010
2011
2012
Year ended June
2013
2014
2015
2016
2017
2018
600
Source: BIS Shrapnel
1333 The Horsley Drive, Wetherill Park. LJ Hooker Commercial Silverwater.
9
Sydney
457 - 463 Victoria Street, Wetherill Park. LJ Hooker Commercial Silverwater.
Investment market
Sydney remains Australia’s most desirable industrial investment market and the
first port of call for most offshore investors. Last year, Sydney made up over 40%
(by value) of industrial property investments across the major capital cities,
equivalent to over $2 billion.
Offshore investors accounted for well
over half of the total, dominated by the
over $1 billion GIC/Frasers Property
portfolio sale to Ascendas. The strength
of demand saw average prime property
prices rise by 9%, following a 6%
increase in 2014. This was underpinned
by a firming in average prime yields
of 50 basis points to 7% over the 12
months to December 2015.
10
The strong performance of the prime
investment market has started to
spread to secondary property. Yields
on secondary properties have firmed by
70 basis points over the past two years,
most of which took place in 2015. Many
investors have either been priced out
of the prime market and forced up the
risk/return curve, or focused on valueadd opportunities.
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
Investment outlook
The investment outlook for the Sydney
industrial market remains highly
positive. Prime yields are forecast to
firm by another 35 to 40 basis points
from now to 2018, most of which
is expected to occur during 2016.
The firming in yields will underwrite
moderate increases in property prices,
with our forecasts suggesting a 10%
rise over the 30 months to June 2018.
Supply
Industrial construction activity declined by over 20% to 450,000 square metres last
year. Around 215,000 square metres of existing stock was also withdrawn from the
market, resulting in net additions of only 235,000 square metres – less than half the
amount added in 2014.
Development activity is dominated by
institutional owners, with Goodman
and Frasers Property the most active.
Meanwhile, a major new region has
emerged in the shape of the Sydney
Business Park at Marsden Park.
Stocks of zoned and ready-to-build
land have declined to the lowest levels
in over a decade, with only around 1.5
years’ worth of average annual land
take-up left at December. However,
new precincts are being serviced at
present, in time for the next round
of demand.
In terms of location, the Outer Region
has been dominating new construction
since the early 2000s. Last year,
Eastern Creek and newcomer Marsden
Park accounted for nearly 40% of all
new space added, with Erskine Park
and Smeaton Grange adding another
11% each.
Supply outlook
around the Green Square area are
being redeveloped as residential
apartments, while the majority of the
Carter Street precinct in Homebush/
Olympic Park has been rezoned to
residential. As a result, vacancy rates
will remain contained in the short to
medium term, despite rising a little as
storm-damaged properties are repaired
or rebuilt.
This year promises to set a new postGFC record in terms of the volume of
space delivered, with known projects
already exceeding the total added
during 2015. Industrial properties
Chart 2: Warehouse demand and new supply, Sydney, 1985 to 2018
Sydney warehouse demand and new supply
Forecast
% change
$2012-13 million
25
900
20
800
Warehouse work done, chain volume MAT (right axis)
15
700
10
600
5
500
0
400
-5
300
-10
200
Business stocks, % change from
previous peak (left axis)
-15
-20
1985
100
0
1987
1989
1991
1993
1995
1997
1999
2001
Year ended June
2003
2005
2007
2009
2011
2013
2015
2017
Source: ABS, BIS Shrapnel
2215 Castlereagh Road, Penrith. LJ Hooker Commercial Penrith.
11
Aerial
images
supplied
courtesy
of Airview
Online
– www.airviewonline.com
12 LJ
Hooker
Commercial
Industrial
Market
Monitor
1st Half 2016
Melbourne
Melbourne
industrial market
The strength of the Victorian economy is
having a positive effect on Melbourne’s
industrial market. Tenant demand has
slowly risen which has had a knock
on effect for both pre-commitment
and speculative construction activity.
Melbourne remains an attractive
destination for capital and competition
for Prime grade assets continues to
see yields firm.
Melbourne South-East industrial market
Average prime
net face rent
$81 psm pa
Average
prime
incentive 25%
Average prime
capital value
$1,190 psm
Average
prime yield
6.8%
1313
Melbourne
Leasing market
Demand for industrial property remained consistent over the course of 2015,
underpinned by growth in the Victorian economy. Gross take-up of warehouse
space matched the long run average with transport and logistics operators and
retailers the most active players.
Notably for the leasing market, the
volume of pre-lease deals made up a
significant proportion of total leasing
activity, dominated by activity in the
West and North. Despite this, rising
completions outpaced demand,
pushing the volume of available space
(for buildings greater than 5,000
square metres) to its highest level in
over six years.
14
The majority of the vacancy is in the
North, closely followed by the West.
Even though the bulk of available
space is within secondary properties,
some 40% of the total is within
prime properties, ensuring plenty of
competition to attract/retain tenants.
As a result, face rents displayed
minimal growth across the regions
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
during 2015 for both prime and
secondary space. In the prime market,
leasing incentives rose to an average of
25% in the South-East region, driving a
modest reduction in effective rents.
Leasing outlook
Victoria’s economic growth is expected to remain positive over the next two to three
years, thanks to contributions from consumer spending and housing construction.
This provides a solid base for industrial leasing demand across the majority of
Melbourne’s industrial precincts.
Forecasts point to a moderate
recovery for industrial property
in Melbourne over the next two
to three years. Most demand for
industrial premises over the short
to medium term is likely to be for
warehousing, with the growing sectors
of the economy underpinning higher
trade volumes and transporting/
warehousing needs.
The increasing penetration of internet
retailing will continue to drive changes
in supply chains in order to satisfy
customer demands and hence
demand for suitable industrial space.
Accordingly, there will be an increase
in demand for 3PL operators to
provide space that is capable of rapid
stock movement. Between December
2015 and June 2018, we forecast
average prime net stated rents in the
South-East to increase by 6%.
The fall in the $A has come too late to
reverse the planned closure of Ford,
Toyota and Holden’s manufacturing
operations by 2017, limiting demand
for new factories in the process. The
only saving grace is that some of
the properties offer redevelopment
opportunities or are close to
obsolescence and will be withdrawn
from stock. One of the largest offerings
has already been placed on the
market, being Holden’s 37-hectare
manufacturing site at Fishermans
Bend, which has been identified
as an employment area within the
Fishermans Bend Precinct Plan.
Chart 5: Industrial
rents and
capital rents
values,and
Melbourne
region, 2004 to 2018
Melbourne
South-East
industrial
capital South-East
values
$/psm
$/psm
Forecast
1,400
100
90
1,200
Values (RHS)
80
1,000
Net stated rents
(LHS)
70
800
60
2004
2005
Year ended June
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
600
Source: BIS Shrapnel
15
Melbourne
Investment market
The industrial investment market is buoyant in Melbourne – with the value of sales
in 2014 and 2015 reaching levels not seen since 2007–08, underpinned by a number
of major portfolio and individual property sales.
The benchmark sale for the market was
the approximately $1 billion portfolio
sale (which included 9 Victorian assets)
from GIC/Frasers to Singaporean
group Ascendas in September. Buying
activity from owner-occupiers has also
remained solid with purchasers taking
advantage of low interest rates to
secure their own premises.
The weight of funds flowing into
industrial property has allowed major
16
developers to secure investors for
virtually any new project that has
secured a tenant. Over the year to
December 2015, we estimate that
prime yields in the benchmark SouthEast region firmed by 60 basis points
to an average of 6.8%, falling below
their 2007 boom levels. Despite rising
vacancies and flat rents, the strength of
investor demand also drove a notable
firming in secondary yields, down by 70
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
basis points to an average of 8.4% in
the South-East at December.
Investment outlook
Forecasts suggest that investors will
push prime yields down by 30 basis
points to an average of 6.5%, over the
next 12 to 18 months. However, if as
forecast the rise in bond rates becomes
more noticeable in 2016–17, the firming
in yields will level off.
Supply
The volume of industrial construction increased sharply over the past 12 months.
Reflecting leasing demand, construction activity in 2015 was dominated by
warehouse building.
The latest building approvals data
indicates continued construction
activity in the short term with annual
turnover levels running at more than
$800 million for warehouses and $150
million for factories. Estimates show
that between 600,000 to 700,000
square metres of industrial space
entered the Melbourne market in 2015,
comfortably above 2014 levels. The
majority of completions in 2015 were
in the North (50%) and the West
(approx. 30%), with the remainder in
the South-East.
Much of the surge in industrial
construction has been driven by
“upgrader demand” in the face of only
moderate economic and “underlying
demand” growth. Crucially, the
buoyancy of the industrial investment
market has played the role of enabler
for upgrader demand. More specifically,
the firming of yields has allowed
developers to offer highly competitive
leases, facilitated by rising
property values.
Supply outlook
Major projects include CEVA’s 90,000
square metre distribution centre at
Truganina, the Reject Shop’s 38,000
square metre facility at Laverton North
and a major distribution centre for
Woolworths to be built at a yet to be
determined site in the South-East.
Ego Pharmaceutical and Dulux have
both underpinned the development
of factories at Dandenong and
Merrifield respectively.
In the short term, industrial construction
work done should be maintained at
current levels as recently approved and
commenced projects are completed.
Chart 4: Warehouse demand and new supply, Melbourne, 1985 to 2018
Melbourne warehouse demand and new supply
Forecast
% change
$2012-13 million
1,000
30
20
Warehouse work done,
chain volume MAT
(right axis)
Business stocks, % change
from previous peak (left axis)
10
800
600
0
400
-10
200
-20
1986
1989
Year ended June
1992
1995
1998
2001
2004
2007
2010
2013
2016
0
Source: ABS, BIS Shrapnel
17
Aerial
images
supplied
courtesy
of Airview
Online
– www.airviewonline.com
18 LJ
Hooker
Commercial
Industrial
Market
Monitor
1st Half 2016
Brisbane
Brisbane
industrial market
The rise of tenant enquiry levels and
demand resulted in strong positive
absorption for Brisbane’s industrial
market, over the second half of 2015.
Improving leasing markets have seen
investor demand rise which has in-turn
driven yields tighter. This is a positive
sign for a pick-up in activity over the
medium term as economic growth in
Queensland gains traction.
Brisbane Trade Coast industrial market
Average prime
net face rent
$125 psm pa
Average
prime
incentive 10%
Average prime
capital value
$1,727 psm
Average
prime yield
7.2%
1919
Brisbane
12032 McDougall Street, Toowoomba. LJ Hooker Commercial Toowoomba.
Leasing market
The recovery in leasing demand appears to be back on track. Despite a state economy
affected by the downturn in the resources industry, the Brisbane industrial property
market recorded net absorption in excess of 230,000 square metres over the six
months to December 2015, its strongest performance since 2011.
Demand was underpinned by retailers
and transport/logistic operators moving
into newly built (and larger) premises,
which in the second half of 2015
included Australian Container Freight
Services, Aldi, Cascade, Prixcar and
TNT among others. Their moves were
motivated by growth, the winning of
new contracts, the pursuit of efficiency
and the need to upgrade to the
latest technology required for
e-commerce operations.
20
The strength of demand in the second
half of 2015 helped reduce the wholeof-market vacancy rate from 7.8% at
June to 7.2% at December. Market
face rents have shown minimal change
over the past six months. At December
2015, average prime net face rents for
existing space sat between $107 per
square metre in the North and $125 in
the TradeCoast area.
Secondary face rents are largely
following their prime counterparts,
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
although their falls through 2015 were
more pronounced at an average of
around –3%. The decline reflects
higher vacancies among secondary
properties, which are concentrated
in the older, traditional areas in the
South and North, and parts of the
TradeCoast. Where possible, tenants
have been taking advantage of
competition in the leasing market
to upgrade, leaving behind
outdated stock.
Leasing outlook
There will be little change in the way the Brisbane industrial property market
performs in the short to medium term, as tenants continue to plan for future growth
and seek newer more efficient premises.
The biggest change is that weak
underlying demand over the remainder
of 2016 is likely to pull down net
absorption, before gradually improving
over the following two years. The main
problem is weak investment, with the
non-mining sector not in a position to fill
the hole left by the resources industry.
Government spending is forecast to
strengthen from next year onwards,
helping to drag SFD growth back into
positive territory by 2017.
On the positive side, we expect
Queensland’s population to continue
to growth at a faster rate than the
national average, with the South-East
capturing the majority of the increase.
More people means additional demand
for goods being stored and distributed,
which will benefit the logistics industry.
There is no end in sight of the global
trend to outsource supply chains. New,
larger and more efficient premises will
be needed to achieve greater efficiency.
Accordingly, net absorption of industrial
space is expected to be stronger than
underlying demand beyond next year.
Chart 7: Industrial
rents prime
and capital
values,
Brisbane
region, 2004 to 2018
Brisbane
Trade Coast
industrial
rents
and TradeCoast
capital values
Forecast
$/psm
$/psm
2,000
160
Values (RHS)
1,750
140
Net stated rents (LHS)
120
1,500
100
1,250
80
2004
2005
2006
2007
2008
2009
2010
2011
2012
Year ended June
2013
2014
2015
2016
2017
2018
1,000
Source: BIS Shrapnel
12032 McDougall Street, Toowoomba. LJ Hooker Commercial Toowoomba.
21
Brisbane
22-26 Len Shield Street, Mackay. LJ Hooker Commercial Mackay.
Investment market
The investment market remains the highlight of the Brisbane industrial market.
The strong performance saw average prime yields firm by 20 basis points over the
past six months, or 35 basis points for the whole of 2015.
There is little variation between regions,
with prime yields averaging 7.2% in the
TradeCoast and 7.3% in the North and
South at December 2015. Remarkably,
at the end of 2015 average prime yields
were only 20 to 30 basis points above
the 7% mark recorded at the peak of
the last boom. In addition, secondary
yields ranged from 8.4% in the
TradeCoast to 8.8% in the
Southern region.
The strength of demand for prime
properties and resultant firming of yields
has seen many investors switching
their attention to the lower grades.
What appeared too risky following the
22
GFC and initial downturn in resources
investment has now become more
acceptable, with the spread between
prime and secondary property yields
closing considerably.
Investment outlook
As in the other major industrial markets,
we expect to see a further firming
in yields over the short term. Prime
investment yields on the TradeCoast
should firm by another 25 basis points
over the coming 18 months while the
TradeCoast will likely retain the mantle
of most popular region for both tenants
and investors. Given the lack of new
construction in the unit estate market,
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
competition between investors and
owner-occupiers will underwrite tight
yields at the smaller end of the market.
Interest from buyers switching from
residential to industrial is likely to put
further pressure on prices and yields.
Average secondary grade yields
are forecast to firm by only around
10 basis points over the coming
12 months. Given the lack of new
construction in the unit estate market,
competition between investors and
owner-occupiers will underwrite tight
yields at the smaller end of the market.
Interest from buyers switching from
residential to industrial is likely to put
further pressure on prices and yields.
Supply
The strength of the industrial property investment market continues to encourage
developers to build ahead of market demand and to attract tenants with upcoming
lease expiries and those on longer term deals.
Firming yields have allowed developers
to offer pre-lease rents equal to
or below those for existing space.
Consequently, construction activity
remains buoyant. While falling well
short of the levels witnessed during
the last boom, completions have been
running at over 300,000 square metres
per annum for the past two years.
At least 30% of projects completed
in 2015 were commenced on a
speculative basis.
Factory approvals have remained
flat, albeit at a very low levels. New
construction continues to focus on the
Fringe of the Brisbane metropolitan
area, with activity centring on Brendale
in the North; Redbank, Darra and
Richlands in the Western Corridor;
Eagle Farm and Fisherman Islands in
the East; and Berrinba and Yatala in the
Outer South/Southern Corridor.
Supply outlook
There is no shortage of industrial land
to accommodate new construction,
despite many existing estates nearing
full development. New estates are
being serviced, including Goodman
and Brickwork’s Rochedale Motorway
Estate, the Stephens Group’s Empire
Industrial Estate at Yatala and Charter
Hall’s Connect West Business Park.
Chart 6: Warehouse
demand
and and
new supply,
Brisbane, 1986 to 2018
Brisbane
warehouse
demand
new supply
Forecast
% change
40
600
Warehouse work done,
chain volume
MAT (right axis)
Business stocks, % change from
previous peak (left axis)
30
$2012-13 million
500
20
400
10
300
0
200
-10
100
-20
1986
1989
Year ended June
1992
1995
1998
2001
2004
2007
2010
2013
2016
0
Source: ABS, BIS Shrapnel
23
Aerial
images
supplied
courtesy
of Airview
Online
– www.airviewonline.com
24 LJ
Hooker
Commercial
Industrial
Market
Monitor
1st Half 2016
Perth
Perth industrial market
The Western Australian economy
continues to face some major
challenges due to declining mining
and resource investment and falling
commodity prices. However, on a
longer term positive note, the substantial
depreciation in the Australian Dollar
should give a boost to the state’s nonmining trade exposed industries such as
tourism, agriculture and manufacturing,
although, it will take time for the state to
transform its economy to focus on these
sectors. The Perth industrial market
faces similar challenges, however, the
search for secure yields has seen quality
assets remain in demand from investors.
Perth Eastern industrial market
Average prime
net face rent
$96 psm pa
Average
prime
incentive 9%
Average prime
capital value
$1,280 psm
Average
prime yield
7.75%
2525
Perth
1-3 Stott Road, Welshpool. LJ Hooker Commercial Perth.
Leasing market
Demand for industrial space in Perth has been subdued over the last 6 to 12 months,
held back by the weakening in the Western Australian economy, which is feeling the
brunt of the downturn in mining and resources investment.
The broader weakness in WA’s
economy is evident in the industrial
leasing market in Perth, where gross
take-up of space in CY 2015 was a little
over two thirds the 10-year average.
Most companies that have relocated
recently have done so with the aim of
consolidating their space requirements
and cut costs by paying less rent.
last 12 months. Prime average stated
rents fell by around 10% over the last
12 months in the benchmark eastern
region to sit at $96 per square metre,
with declines of 4% to 12% in the
other regions. In the secondary market
rentals have also fallen over 2015, down
by an average of 4% – although falls of
up to 20% have been reported.
The combination of weak demand
and increasing vacancies has had a
significant impact on rents over the
Over the same period, leasing
incentives for both prime and
secondary space have climbed
26
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
from 5% across the three regions to
between 8% and 10%. Nevertheless,
these levels of incentives remain well
below markets like Melbourne, where
dominant institutional owners prefer
to increase incentives to support face
rents and property values. In Perth, the
more prevalent private owners have a
preference for lowering stated rents to
retain or attract tenants.
Leasing outlook
The short to medium term outlook for the Perth industrial market is challenging.
Softness in tenant demand is expected to remain in place in the short term thanks to
the shift in Western Australia’s economic fortunes.
Positively, Gross State Product (GSP)
is set to receive a strong boost over the
next three years stemming from export
growth associated with the massive
volume of resources production coming
on stream and, to a lesser extent,
rising agricultural and manufactured
production (helped along by the lower
$A). The problem is that investment
has a much stronger multiplier effect
than production, which filters through to
industrial property demand.
For Western Australia, the next two
to three years will be characterised
by a number of cyclical and structural
shifts. In terms of non-mining business
investment, residential construction in
WA is expected to peak this financial
year. This should be followed by a
recovery in public investment from
2017–18, led by roads (helped by
federal funding), railways, water and
telecommunications infrastructure.
Softer demand means there is likely
to be slight downward pressure
on rents and/or upward pressure
on leasing incentives. Businesses,
particularly those servicing the
resources industry, are likely to maintain
their cost-cutting focus for some time
yet and will look to reduce occupancy
costs, particularly if their existing leases
are nearing expiry and they are paying
well above market rates.
Perth
demand
approvalsPerth, 2002 to 2018
Chart 9:
Demandand
andindustrial
industrial building
building approvals,
Forecast
% change
$'000's
100
700
Total approvals,
Perth (right axis)
80
600
60
500
40
400
20
300
200
0
Total demand index, % change from
previous peak (left axis)
-20
-40
2002
2003
2004
2005
2006
2007
2008
2009
Year ended June
2010
2011
100
2012
2013
2014
2015
2016
2017
0
2018
Source: ABS, BIS Shrapnel
223 Star Street, Welshpool. LJ Hooker Commercial Perth.
27
Perth
525 Great Eastern Highway, Redcliffe. LJ Hooker Commercial Perth.
Investment market
Institutional and foreign investors remain keenly focused on prime properties with
long WALEs. The resulting competition for such assets has helped underpin steady
or even firming yields.
As at December 2015, yields for prime
property ranged from 6.25% up to
8.75%. Average yields in the East sat
at 7.75%, reflecting a 40 basis point
firming through 2015. The wide range in
yields reflected differences in asset risk
profile and location.
The benchmark sale for the Perth
industrial market occurred in
September when Ascendas acquired
28
the 21,000 square metre warehouse at
35 Baile Road in Canning Vale as part
of the GIC portfolio sale on a yield of
6.25%. Across the regions, secondary
property traded on yields 50 to 100
basis points higher than prime property.
Investment outlook
In the short term, the flow of funds
seeking exposure to industrial property
LJ Hooker Commercial Industrial Market Monitor H1 2015
is likely to continue to support yields
at current levels, particularly for prime
stock with long WALEs. However,
we expect further falls in rents will
increasingly be priced in by investors
in Perth. This will put pressure on
yields to soften, particularly for
secondary properties.
Supply
Industrial construction added between 90,000 and 170,000 square metres of new
space to the Perth industrial market last year, with the variation largely due to
geographical coverage and timing issues.
The bulk of new supply was warehouse
space, with the southern and eastern
regions capturing the most new supply.
Among the largest completions in
the second half of 2015 were Reece
Plumbing’s new 26,000 square metre
warehouse at Jandakot Airport, along
with CEVA and Mainfreight’s distribution
centres at Hazelmere (45,000 square
metres combined).
Also very close to completion are
Kmart (41,000 square metre) and Aldi
(49,000 square metre) distribution
centres, also at Jandakot Airport.
The stand-out factory development
was Hitachi’s new facility spanning
approximately 15,000 square metres on
Allen Road at Forrestdale, which is also
close to completion.
Supply outlook
The good news for the Perth industrial
market is that after the current round of
new industrial properties is completed,
there is little else in the pipeline. The
only major project likely to start in the
near term is a new 20,000 square
metre warehouse pre-committed to
McPhee Transport on Talbot Road
in Hazelmere. Since April 2015, no
individual project greater than $20
million has been approved. That means
new supply will not continue to add to
the considerable vacancies already in
the market in the short term.
857 Abernethy Road, Forrestfield. LJ Hooker Commercial Perth.
29
Aerial
images
supplied
courtesy
of Airview
Online
– www.airviewonline.com
30 LJ
Hooker
Commercial
Industrial
Market
Monitor
1st Half 2016
Adelaide
Adelaide industrial
market
The SA economy is expected to get a
boost from an up lift in public investment
over the next few years, led by robust
rises in road construction and the
NBN roll-out. Other projects such as
defence facilities, work on the Festival
Plaza upgrade and at some universities
will also contribute. Industrial markets
have remained stable over the course
of the past year, however, a pick-up
in activity has been evident around
the newly announced and completed
infrastructure projects.
Adelaide Inner North industrial market
Average prime
net face rent
$111 psm pa
Average
prime
incentive 15%
Average prime
capital value
$1,355 psm
Average
prime
yield 8.2%
3131
Adelaide
Lot 506 Woomera Avenue, Edinburgh. LJ Hooker Commercial Adelaide.
Leasing market
Leasing activity in Adelaide continues to be modest with the majority of demand
concentrated in the North and Western regions, and at the smaller end of the
market. Demand is coming mainly from the non-automotive manufacturing,
engineering and wholesale sectors.
In terms of activity, there has been
one leasing deal of over 5,000 square
metres since September 2015 – a
company associated with IKEA took
some 6,500 square metres in Netley.
There have also been three deals of
around 2,500 to 3,000 square metres.
Corridor. In August 2015, construction
commenced on the $896 million
Torrens Road to River Torrens section,
while late in the year the state and
federal governments committed to
the $946 million Northern Connector
section (due to start in May 2016).
One positive contributor to growth
over the past decade has been
spending on infrastructure, particularly
the 78-kilometre long North-South
Leasing outlook
32
Looking ahead, we expect to see a
mild recovery in underlying demand
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
for industrial space over the next few
years, thanks to a pick-up in business
stocks. Demand for warehouse
property should therefore enjoy a slight
boost. In addition to new demand,
there is likely to be an element of
relocation demand as companies take
advantage of further road infrastructure
improvements to relocate to sites with
superior accessibility.
Investment market
The 2015 calendar year saw a decline in the total value of Adelaide’s industrial sale
transactions, following a record value of industrial transactions in 2014 (valued at
around $350 million).
The $60 million purchase of the
Metcash Distribution Centre at Kidman
Park by Cache Logistics (Singapore) in
November 2015 helped lift the year’s
total to around $150 million.
Wingfield was also sold for $21 million;
and Primewest acquired a property in
Rosberg Road, Wingfield for around
$12 million.
Prime investment yields firmed by
around 30 basis points through 2015 to
an estimated December 2015 average
of 8.2%. Secondary yields generally
remained flat over the same period,
although some cases of softer yields
have been reported.
There were three other sales of over
$10 million: Growthpoint paid $21
million for the newly constructed and
fully leased 1–3 Pope Court, Beverley, a
14,460 square metre building split into
three tenancies; the Star Track Express
building in Grand Junction Road,
Investment outlook
Looking forward, we could well see
some more cap rate compression near
term, though this would be limited to
the very top of the market. The investor
profile is unlikely to change in the
near term, although AREITs are likely
candidates if a large, newly developed
asset with a long lease in place comes
onto the market.
Supply
No notable pre-commitments were recorded over the past 12 months, with the main
boost to 2015 completions coming from the previously committed 30,000 square
metre Aldi distribution centre in Regency Park.
New industrial supply is unlikely to
significantly exceed demand for factory
and warehouse space in the medium
term except in the Outer North as
Holden closes. ABS building approvals
figures spiked in late 2014 due to the
inclusion of Aldi’s new 30,000 square
metre distribution centre, but they have
since returned to very low levels.
Supply outlook
North region is to be developed for
industrial use over the next 30 years,
although there is a chance that at least
part of it may be set aside for residential
construction. Adelaide Capital Partners
has an option to develop 150 hectares
and rights over the remaining land
for nine years. Adjacent to this, the
state government has also released
15 hectares of land known as
“East Grand Trunkway”.
The former multi-function site of 400
hectares at Gillman in the prime Inner
In October 2015, the state government
selected a 40-hectare site at Parafield
Airport as the preferred site for a
Food Park. The Park will allow the
co-location of food industry tenants
and related service providers with the
aim of creating cost competitiveness
and driving efficiencies to overcome
existing challenges in expanding
facilities and the increasing costs of
operation. The site is development
ready. Over 30 businesses have
expressed interest in the park and
a demand analysis is currently
underway to assist in planning
and designing the park.
Adelaide
demand
and
industrial
building
approvals
Chart 8: Demand
and
industrial
building
approvals,
Adelaide, 2002 to 2018
Forecast
% change
$ million
20
360
Total approvals,
Adelaide (right axis)
15
10
320
280
5
240
0
200
-5
160
-10
120
Total demand index, % change from
previous peak (left axis)
-15
-20
2002
2003
Year ended June
2004
2005
2006
2007
2008
2009
2010
2011
80
2012
2013
2014
2015
2016
2017
40
2018
Source: ABS, BIS Shrapnel
33
Aerial
images
supplied
courtesy
of Airview
Online
– www.airviewonline.com
34 LJ
Hooker
Commercial
Industrial
Market
Monitor
1st Half 2016
Canberra
Canberra industrial
market
Demand for industrial space has
been mixed across Canberra’s three
main industrial precincts. Mitchell is
experiencing the strongest demand of
the three, due to its catchment covering
the fast growing northern suburbs and
being the location for the new National
Archives. Hume has been able to
attract the majority of Canberra’s new
construction for the past three years.
New residents include transport and
distribution firms - requiring larger
than average sites and good access35
to the major road network - as well as
construction companies. In contrast,
Fyshwick has been losing occupiers
operating in the large format retailing
area to Majura Park at the airport.
Canberra industrial market
Average prime
net face rent
$135 psm pa
Average
prime
incentive N/A
Average prime
capital value
$1,570 psm
Average
prime
yield 8.6%
35
Canberra
26 Ipswich Street, Fyshwick. LJ Hooker Commercial Canberra.
Leasing market
Rents steadied in Canberra in 2015 after coming under pressure from soft demand
in the previous year. At December 2015, average prime warehouse rents stood at
$130 to $140 per square metre – the same as in June – while secondary properties
achieved between $80 and $100 per square metre.
Building vacancies remain highest
in Fyshwick, due to both the age of
existing stock and competition from
Majura Park. In contrast, Mitchell
features the tightest submarket, with
new development relying on the
recycling of existing premises. Hume
also has little vacancy but sufficient
ready-to-build land to accommodate
average rates of land take-up for up
to five years.
Leasing outlook
Looking forward, aggregate demand
for warehousing space is expected to
remain flat with upgrader demand for
new space continuing to underwrite
the construction of new premises.
Supply chain outsourcing, including
transport and storage for retailers,
are the most likely source of demand
with contribution also from records
management companies.
On the factory side, the Capital Metro
project will boost demand from
36
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
construction companies, including
concrete pre-casting. Already, a
number of sites have sold for this
purpose. Most of the demand for
larger new premises will find a
home in Hume.
Apart from demand for space,
one of the keys to existing rents
is competition from the pre-lease
market. There is plenty of land and
as long as yields remain firm, or even
firming, developers will be able to
offer highly competitive deals in
order to attract tenants.
Investment market
Only one major industrial property sale was recorded in Canberra in the second
half of 2015. A 3,700 square metre warehouse, leased to communication equipment
retailer Bitek with a 7.5-year WALE, sold on a yield of 8%.
Overall, average prime yields are closer
to 8.6% – unchanged from June 2015
– while yields on secondary assets are
typically in the high 9%s and upwards.
As elsewhere, WALE and strength of
covenant are the prime determinants of
yield and price.
Industrial land values were relatively
stable through 2015. At Hume, blocks
of less than 2,000 square metres are
selling for around $180 per square
metre, though asking prices are closer
to $200 per square metre. Larger
blocks can be had for $140 to $160
per square metre.
The investment market is expected to
continue to operate in a similar manner
to 2015 over the coming two to three
years, with low interest rates the key
driver. Securely leased properties will
command a significant premium over
those featuring short WALEs, (almost)
regardless of grade. Apart from the
traditional local investors, there is
a chance that buyers priced out
of the Sydney and Melbourne
markets will show an interest in
the Canberra market.
Supply
Despite modest underlying demand, industrial construction activity has been
maintained at a solid level over the past three years. 2015 saw a jump in new
completions from 5,000 square metres to over 18,000 square metres, over threequarters of which was located at Hume.
Recent projects include a 4,000 square
metre warehouse for National Mailing
& Marketing and new buildings for
PlastaMasta (1,800 square metres) and
Corkhill Brothers, while in Fyshwick
Canberra Toyota completed a 3,500
square metre extension to their existing
facilities. Most completions in 2015
were design-and-construct projects for
owner-occupiers.
Supply outlook
Looking forward, further population
growth and housing construction in the
northern suburbs will benefit Mitchell.
However, expansion space will remain
limited unless planning regulations are
changed. If not, some demand is likely
to flow into one or both of the other
main precincts. Fyshwick’s stock is
ageing and it most likely will continue
to lose businesses to Majura Park and
Hume. However, there is opportunity to
redevelop obsolete stock.
Given the modest outlook for demand,
traditional warehouse and factory
construction activity will be moderate.
We expect owner-occupier–led activity
to underwrite several new projects at
Hume in FY2017, but the magnitude of
activity will be well below previous peak
levels. The upside is that vacancy rates
should remain relatively stable. Once
again, the exception is Fyshwick, which
could suffer further loss of business.
Chart 12: Demand
and
industrial
building
approvals,
Canberra, 2002 to 2018
Canberra
demand
and
industrial
building
approvals
Forecast
% change
15
$ million
75
Total approvals,
ACT (right axis)
10
60
5
45
0
30
-5
-10
2002
15
Total demand index, % change from
previous peak (left axis)
2003
Year ended June
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
0
2018
Source: ABS, BIS Shrapnel
37
Aerial
images
supplied
courtesy
of Airview
Online
– www.airviewonline.com
38 LJ
Hooker
Commercial
Industrial
Market
Monitor
1st Half 2016
Hobart
Hobart industrial market
Hobart’s traditional industrial core lies
to the north of the city around Derwent
Park, stretching south to Moonah
and further north to Montrose. Other
industrial precincts include Kingston in
the south, Mornington and Cambridge
in the east (the latter adjacent to the
Hobart International Airport), and
Brighton in the north alongside the
Midland Highway.
Hobart industrial market
Average prime
gross face rent
$100 psm pa
Average
prime
incentive 5%
Average
prime
yield 8.1%
3939
Hobart
27 Crooked Billet Drive, Hobart. LJ Hooker Commercial Hobart.
Leasing market
After a period of underperformance, the Tasmanian economy finally started to
improve from 2013–14. The improvement in the economy translated to an increase
in the underlying demand for industrial space in Tasmania.
Reflecting the excess capacity in the
market, the leasing market in Hobart
has been quiet, with high vacancy
among existing buildings across the
industrial precincts, particularly in
Cambridge. Most of the vacancy is in
buildings less than 500 square metres
in size. However, aggregate demand
increased by 5.4% in calendar 2015,
albeit with the first half being stronger
than the second.
Leasing outlook
Little has changed in terms of the
composition of demand for industrial
space over the past 12 months.
The outlook for demand across Hobart
is dependent on the performance of
the Tasmanian economy, which looks
40
The few companies enquiring for space
sought between 500 and 1,000 square
metres of warehousing space. As a
result of the softness in the leasing
market, there has been little to no
change in gross rents. Higher quality
space continues to lease for up to $140
per square metre, while secondary
space is closer to $60 per square metre
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
set for further improvement in the short
term. This should flow through to a
rise in business stock accumulation,
resulting in a rise in new demand
for warehouses. Most demand for
industrial premises over the short to
medium term is likely to come from
warehouse users who will be servicing
the non-dwelling building (including
construction companies and building
material suppliers) or retail sectors.
Investment market
There is some interest in the Hobart industrial investment market, but investors are
very selective and risk averse. Prime buildings with long-term leases are the most
highly sought; however, there were no major transactions in 2015 due to a lack of
owners willing to sell.
Indicative prime yields have remained
steady over the last 12 months at
between 8 to 8.25%. The owneroccupier market remains steady but
relatively quiet. Those in the market are
attracted by low interest rates, which
makes ownership compare favourably
to renting.
Land values have also remained stable
over the past year, with sufficient land
available – particularly in Cambridge
and Brighton – to satisfy any given level
of demand.
Prime property with low leasing risk will
remain a popular choice for investors,
with little pressure on yields to soften,
given our forecast of modest rises
in bond rates in the short term. In
contrast, secondary properties with
short-term lease expiries will be less
sought after. The higher yields available
in Hobart – compared to eastern
seaboard capitals – may attract a few
smaller operators such as syndicators.
Supply
No major industrial projects were completed in the Hobart metropolitan area in 2015.
This is reflected in total construction work done, which has been relatively flat since
2012, averaging around $80 million.
Indeed, the latest data, for the year to
September 2015, saw total work done
slump to $64 million – a level not seen
since the beginning of the decade.
Both factories and warehouses
contributed to the decline. Tasmania
is a small industrial market, with
activity concentrated in the
sub-$5 million category.
Furthermore, there are no major briefs
currently in the market that could
underpin the next major industrial
development. New warehouse
approvals have been weak since the
Toll facility was approved in 2013 and
factory approvals are also weak.
Supply outlook
It will take time to absorb excess
capacity (i.e. high vacancies) among
existing industrial properties. This
should limit speculatively built
development, which has been prevalent
at the smaller end of the market in
the past. There is the potential for
pre-commitment deals to underwrite
the construction of new warehouses,
but this would be independent of
underlying demand. Any major precommitment is likely to be underwritten
by larger sized businesses taking
advantage of the efficiencies afforded
by new premises closer to the major
road network, such as at Brighton.
Hobart
buildingapprovals,
approvalsHobart, 2002 to 2018
Chart 10:demand
Demandand
and industrial
industrial building
Forecast
% change
45
$ million
50
Total approvals, MAT
Hobart (right axis)
30
40
15
30
0
20
-15
10
-30
2002
Total demand index, % change from
previous peak (left axis)
2003
Year ended June
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
0
2018
Source: ABS, BIS Shrapnel
41
Aerial
images
supplied
courtesy
of Airview
Online
– www.airviewonline.com
42 LJ
Hooker
Commercial
Industrial
Market
Monitor
1st Half 2016
Darwin
Darwin industrial market
The Darwin industrial market comprises
a number of precincts, most of which
stretch out to the East along the Stuart
Highway towards Yarrawonga. The
prime area, East Arm, is controlled by
the government and is zoned for the
development of strategic industry, such
as oil and gas.
Darwin industrial market
Average prime
net face rent
$195 psm pa
Average
prime
incentive 0%
Average prime
capital value
$2,438 psm
Average
prime
yield 8.0%
4343
Darwin
7 Toupein Road, Yarrawonga. LJ Hooker Commercial Darwin.
Leasing market
Strong economic growth for the Northern Territory is expected this financial year.
It is being underpinned by business stock accumulation supplying non-dwelling
construction and, to a lesser extent, by household consumption.
Nevertheless, the strength in underlying
demand has not translated to the
leasing market or owner-occupier
market, with few enquiries for space
across the regions over the last six
months. Most industrial occupiers in
the Darwin industrial market are small
users, requiring less than 1,000 square
metres and are already geared up to
service peak demand from Ichthys.
Across Darwin, rents for higher quality
space sit within a range of $140 to
$250 per square metre and from $100
to $120 for secondary space. Rents are
higher than in other parts of Australia
reflecting Darwin’s remoteness.
44
Indeed, the Darwin industrial market
has missed out on much of the
boost from Ichthys, with a significant
proportion of contracts awarded
to companies from outside the
Territory and most construction
workers operating on a fly-in-fly-out
basis. Previously negotiated deals
underpinned the major moves of
Northline Logistics, Qube and a couple
of other smaller logistics companies in
the last six months, all of which moved
into pre-committed space at East Arm.
LJ Hooker Commercial Industrial Market Monitor 1st Half 2016
Leasing outlook
Looking forward, one issue is that the
Darwin industrial market is already
geared up to service the expected
peak in demand over the next 6 to
12 months, particularly regarding
accommodating the large workforce at
the Ichthys construction site. While the
outlook for industrial demand in Darwin
looks soft, it is important to note that it
did not benefit all that much from the
huge rise in investment associated
with Ichthys. Consequently, it will not
suffer all the negatives as investment
winds down.
Investment market
The investment market in Darwin was subdued last year, with few landmark sales.
Like rents, yields have remained stable over the last six months of the year.
Investment outlook
Prime yields sit within a range of
7.5% to 8.5%, although the paucity
of sales evidence means the figures
are mostly indicative.
The outlook for activity in the
investment market is likely to remain
quiet. Low interest rates should support
prices in the short term. However,
investors will be well aware that the
boom the Ichthys project brought
to Darwin has less than a year to go
and that demand for industrial space
will weaken significantly thereafter.
Accordingly, any property with short
to medium term lease expiries will
be discounted.
Supply
New space completed over the past six months was dominated by Northline
Logistics’ pre-committed distribution centre at 14 Dawson Street, spanning almost
15,000 square metres, and Qube’s 11,000 square metre warehouse on Berrimah Rd –
both at East Arm.
Two other warehouses on Dawson
Street, East Arm added over 6,000
square metres to stock in mid-2015.
Construction of smaller projects is
currently concentrated in Berrimah, at
the Berrimah Business Park and on Mel
Road. Projects primarily comprise small
freestanding buildings and speculatively
built industrial units.
land available in Berrimah, Wishart,
Tivendale and East Arm
all new space was pre-committed to
expanding tenants, while in Berrimah,
newly completed speculatively-built
space has also been taken up.
Supply outlook
Despite only modest land take-up,
industrial land values have not changed
significantly across the regions over the
last 12 months.
Completions over the last six months
have not added to vacancy levels
across most precincts which has
kept market rents flat. In East Arm,
With the exception of the traditional
industrial precincts close to the city
centre, such as Winnellie, there is
sufficient vacant and ready-to-build
The good news is that the latest
approvals data suggests industrial
property construction will weaken
over the short term as there have
been no significant approvals for
either warehouses or factories since
the start of 2015.
Darwin
industrialbuilding
buildingapprovals,
approvalsDarwin, 2002 to 2018
Chart 11:demand
Demandand
and industrial
Forecast
% change
$ million
90
100
Total approvals,
Darwin (right axis)
60
80
30
60
0
40
-30
-60
2002
20
Total demand index, % change from
previous peak (left axis)
2003
Year ended June
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
0
2018
Source: ABS, BIS Shrapnel
45
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