Vacancy continues to fall across all markets in Adelaide

Vacancy continues to fall across all markets in Adelaide
Vacancy continues to fall across all markets in Adelaide

The Adelaide industrial markets have continued to see improvements in vacancy over the first half with vacancy falling to 4.8 percent, down from five percent six months ago, according to Colliers International’s latest report.

Leasing enquiry has also continued to improve with several large requirements in the market which are unlikely to be satisfied with current supply.

This is likely to lead to further design and construct activity in 2017 and into 2018.

One of the largest pre-commitments in the Adelaide industrial market for many years was secured and is under construction in Gillman for a 20,000sqm facility for a Multinational Corporate Client.

On the investment side, there has been limited activity in the market above $5 million price bracket with total sales volume of $50.1 million year to date which is about half of the 10 year average for sales.

Sales below $5 million has seen more activity with owner occupiers being the most active purchaser group in the market.

There has also been an improvement in enquiry to purchase industrial property which is likely to lead to higher sales volumes through the last quarter and into next year.

This has been driven by the low interest rate environment and the opportunity to purchase a facility through a superannuation vehicle or through the business.

This shift has impacted leasing activity with a number of leasing appointments transferring to sales campaigns.

The awarding of the submarines contract to DCNS earlier this year and the building of the o shore patrol vessels in the short term has seen Adelaide become the defence hub in Australia.

The total defence spend for the Federal government is over $90 billion, with a signi cant amount of construction of these projects to occur in Adelaide. This has ensured that there is a future for the defence sector in Adelaide for the next decade and beyond.

Although it is still early in the project, it is expected that there will be several requirements for the construction of new facilities for the submarines project.

The Federal government has invested in the Centre for Defence Capability in Adelaide which will drive innovation in the defence sector as well as open up international opportunities for the defence sector.

This centre is based in Adelaide with a 10 year $230 million federal commitment to grow the defence sector. This sector is likely to drive demand with the current facilities unlikely to meet the demand for this project and hence it is likely to result in construction of new facilities, mostly likely in the northern markets.

Vacancy in the Outer North market has recorded the lowest vacancy rate of all of the precincts with a vacancy rate of 2.8 per cent. This is a dramatic turn-around from 12 months ago where vacancy was recorded at 19.9 per cent.

The Outer North market has the highest exposure to the closure of the Holden plant expected late in 2017, and the high vacancy recorded 12 months ago was a result of several suppliers vacating upon the announcement of the closure.

The Outer North has seen five sales transactions over the last three months with two investment sales and three vacant possession sales which were purchased for owner occupation.

The owner occupier sales were originally listed as leasing opportunities.

The Outer North industrial market are offering very competitive rents for a prime grade buildings and is therefore are an attractive option for tenants.

Prime rents have stabilised over the last 12 months and incentives have also remained stable and therefore there is limited change in effective rents over the last 12 months.

The Outer North market has undergone this significant correction in rental and incentives which has impacted on overall vacancy over the last two years and although there is still likely to be some further vacancy when Holden closes, it is unlikely to be as significantly affected as first predicted.

Despite this there are still some head winds in this precinct with the closure of Holden due in late 2017 as they are the largest occupier in the area.

A number of strategic discussions around the closure of the site have mooted several opportunities, however it remains to be seen what will happen with the Elizabeth site and the surrounding area.

It is clear from recent activity and the significant drop in vacancy rates in the precinct that occupiers, landlords and owners are reacting well in advance of the closure benefiting the whole market.

The next two stages of the upgrade of the north south corridor has commenced.

The Torrens to Torrens project addresses the 3.7 kilometre section of South Road between the Torrens River and Torrens River.

The scope of this project includes the lowering of a 2.5 km section of road, an overpass of the Outer Harbor line and upgrades to the to Torrens Road, Hawker Street, Hurtle Street, Port Road, Grange Road/Manton Street and Ashwin Parade/ West Thebarton Road intersections. This road will have no traffic lights and will see three lanes run in both directions and is due to complete in 2018.

The Darlington upgrade project has commenced construction which will address the section of Main South Road between the Southern Expressway and Ayliffes Road. This will connect the Tonsley site to Flinders University with joint federal and state funding to extend the Tonsley line from the current terminus at Tonsley to the Flinders Medical centre and the Flinders University.

The State and Federal governments recently announced joint funding of $985 million of for the Northern Connector project. This will join the Northern Expressway, Port Wakefield Road, South Road Expressway and the Port River Expressway and will bypass six busy intersections along South Road.

Adelaide Colliers International

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