Regional industrial rents, values rising faster than in capital cities
Industrial investments in regional hubs such as Wollongong, Newcastle, Geelong and the Gold Coast are outperforming those in booming capital-city markets, a report by Colliers says.
Although most institutional capital seeking exposure to industrial property is finding a home in the fiercely competitive Sydney, Melbourne and Brisbane markets, capital cities generated prime rental growth of only 1.2 per cent last financial year compared with 8.3 per cent for big regional centres on the east coast.
In addition, prime capital values across regional centres surged 27.2 per cent in the same period, slightly ahead of capital-city growth of 25.3 per cent.
Regional centres also kept pace with the tightening of prime industrial yields in the capital cities, recording 105 basis points of compression over the year to June 30 compared with 107 basis points across the capital cities.
Luke Crawford, director of research at Colliers said, regional economies had been the standout performers over the past year, and this was reflected in their industrial markets.
“Fundamentals such as e-commerce, infrastructure investment and population growth have driven occupier demand in these markets, while a re-weighting of capital towards the sector has pushed some buyers further afield in search of opportunities, and regional centres have been a beneficiary of this,” he said.
Warehouse shortage
According to Colliers Regional Spotlight Report, heightened demand for regional warehouse space over the last 18 months had led to a shortage in supply. As a result, vacancy rates in the key regional centres ranged from 2 per cent to 3 per cent, and less than 2 per cent in many major suburbs.
Newcastle-based director Trent Robertson said leasing demand across the Hunter region was close to historical highs and, combined with vacancy rates below 2 per cent in many industrial suburbs, was pushing up rents.
“Rental growth over the past 12 months has measured 10 per cent, which is well above the rates recorded in Sydney over the same period,” he said.
In Geelong, rents rose 15 per cent over the past year to an average of $95 per square metre.
Geelong-based Colliers director Jonathon Lumsden said developers were actively seeking land opportunities, and land values had exceeded $300 per square metre in some cases.
“The local industrial sector has performed extremely well over the past year, buoyed by a significant pipeline of infrastructure projects, access to existing port, rail, and road infrastructure, and immediate proximity to a large and growing population base,” Mr Lumsden aid.
On the Sunshine Coast, strong occupier demand, particularly from the construction, transport, e-commerce and manufacturing sectors, lifted rents 8.3 per cent to an average of $130 per square metre.
“This level of increase is well above the rates recorded in the Brisbane market over the same period,” said Colliers Sunshine Coast managing director Nick Dowling.
