This was the largest industrial project completed in Adelaide in Q3 | Real Estate Asia
, Australia

This was the largest industrial project completed in Adelaide in Q3

It was a 12,000sqm service centre.

There was approximately 31,600 sqm of new supply added to Adelaide total stock in the third quarter of the year, reflecting three consecutive quarters of decreasing supply delivery. Although sentiment has slowed, JLL said in a report that the total supply remained above the 10 year quarterly average. Demand for pre-lease, as well as design and construction deals, have also improved.

JLL added that the largest completion of the quarter was a 12,000 sqm service centre, comprising the store, wash and repair of pallets and containers for logistics service company CHEP, which was delivered by Gibb Group in Direk in the Outer North precinct.

Here’s more from JLL:

Occupier demand from smaller warehouse users has decreased quarterly gross take-up in the quarter (36,100 sqm). However, this figure is above the average quarterly gross take-up recorded over the last two years (34,300 sqm).

More broadly, there has been a lack of large occupier moves in the Adelaide market with only two occupier moves in 2023 above 10,000 sqm. In the quarter, there were six major occupier moves with the largest being a 12,000 sqm pre-lease deal for CHEP at 37 Caribou Drive, Direk in the Outer North precinct.

Average prime net rents increase

Average prime net face rents increased across all precincts in the quarter, while incentives were relatively stable. The continuing trend of occupier demand outpacing supply has resulted in asking rents increasing.

Opportunistic owner-occupiers boosted the demand for development sites, driving average land values up again, by 13.6% to 16.7% over the quarter.

Outlook: Recovering retail trade environment to impact the market

Occupier demand is expected to improve over the next 12 months as the broader economic volatility relating to interest rates and inflation are anticipated to slowly normalise in 2024. Despite this, speculative supply from developers is likely to remain low as construction material and labour costs remain elevated.

Low supply should support ongoing rental growth over the short term. However, the yield decompression cycle is expected to persist through to the end of 2023 and into 2024 as the cost of debt negatively impacts investment return hurdles.

Note: Adelaide Logistics & Industrial refers to Adelaide's industrial market (all grades).

 

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