The Rise of Industrial Real Estate

In recent years, the industrial property market in Australia and Sydney has been on the rise, with record low vacancy rates and rising demand. This is due to a combination of factors, including the growth of e-commerce and onshoring, an undersupply of warehouse space, and increased interest in logistics over manufacturing. Additionally, more people becoming aware of the potential benefits of investing in industrial properties—including potentially high-yield returns and low maintenance costs—and so they are now turning to these kinds of investments as an alternative to traditional residential real estate. So what’s driving rising trends in the industrial property market? Let’s take a look….

Record low vacancy rates

In 2022, Australia was recorded as the nation with the lowest industrial vacancy rate. Sydney in particular experienced a record-low vacancy rate of 0.6%

These record-low vacancy rates have resulted in industrial rents soaring by 30% across most of Sydney. According to Cushman & Wakefield, Sydney ​​now has the fastest-growing industrial rental market across the Asia Pacific, largely due to the extremely low vacancy and sustained demand.

A contributing factor to the low vacancy rates is the increased construction delays. According to CBRE, construction delays resulting from wet weather and labour shortages, and rising costs based on material shortages and supply chain disruptions, have delayed some projects by up to one year, with some cancelled.

CBRE has also reported that vacancy rates are expected to remain at record-low levels for the foreseeable future. This is a result of the construction delays and rising costs that combined to reduce Australia’s supply pipeline of new industrial and logistics space across the five major capital cities in 2022.

Increased demand in the property market

In 2023, the rental value of industrial property is expected to increase by an additional 11%, with demand continuing to exceed supply in the industrial property market.

The growth in e-commerce has been one of the biggest drivers behind the rise in industrial property investment. As more businesses shift their operations online, there is an increasing demand for warehouse space to store goods. This has led to a shortage of available warehouse space in some areas, resulting in higher rental rates and greater demand for these kinds of properties.

Industrial property now holds a greater focus on logistics over manufacturing, due to the rapid expansion of e-commerce in Australia. In Sydney, some east coast owner-occupiers are being prompted to cash in on their long-held assets and upgrade their operations with automation and new technology. These trends have translated into industrial values rising by over 36.2% over recent years.

The industrial property market is seeing unprecedented growth. If you want to learn more, contact our team today!

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