We'll be talking more about Adelaide in 2018

One of many things that will be different in real estate in 2018 is that we’ll be talking a more about Adelaide.

I see the South Australian capital as the most under-rated of the capital city markets, largely because of the popular perception that South Australia lacks economic muscle and population oomph.

But something is building in SA that will change its image and cause investors to pay greater attention.

There are many clues to bigger and better things brewing. The first of them was the elevation of SA in the latest edition of CommSec’s State of the States report, in which it was promoted from No.6 to No.4 in the economic rankings.

South Australia scored well on business investment, employment and dwelling construction.

The latest Business SA-Statewide Super survey of business expectations showed confidence and business conditions are on the rise (but with lingering concerns about the future direction of the state economy).

The latest ABS jobless data showed the SA unemployment rate steady at 5.8 percent in seasonally-adjusted terms (a little above the national average of 5.4 percent) but with the trend data showing the SA jobless rate dropping 0.2 to 5.6 percent - which was the lowest in five years.

So the current indicators look a little more positive. But the big game-changing events are yet to come.

We’ve seen the beginnings of the impact from the biggest of them, the $89 billion program of building vessels for the Navy, which will be focused primarily on Adelaide.

The first step is a $535 million infrastructure build at Adelaide’s naval shipyard and reports indicate this means 600 jobs, for which hiring is under way. Lendlease has been selected as the managing contractor for the Osborne South Shipyard construction.

This infrastructure is expected to be ready for the $35 billion project to build nine frigates, starting in 2020. But the total project is considerably bigger than that.

A PwC study has forecast the overall $89 billion naval shipbuilding program, headlined by the $50 billion project to build 12 new submarines, will create 8,000 jobs in South Australia over 40 years and deliver a $134 billion boost to Gross State Product.

Another big impact will come from revival in the resources sector. SA is a significant resources state, though much less in the headlines than Western Australian and Queensland.

BHP has indicated it plans to spend over $3 billion expanding its Olympic Dam mine. It recently announced an immediate $US800 million injection to “stabilise” Olympic Dam over the next few years, to be followed in 2020 by a $US2.1 billion “brownfields expansion” that would double the mine’s output.

There’s plenty more action in the SA mining sector, including the decision by OZ Minerals to invest $900 million in the Carrapateena project and CU River announcing an $800 million expansion of its Cairn Hill mine, creating 1,300 jobs.

Energy production is potentially a massive industry in SA, with a dozen projects worth around $5 billion targeted on the Port Augusta area, many of them solar and wind developments.

Last week the (allegedly) world’s largest lithium-ion battery was officially turned on at Jamestown by Premier Jay Weatherill, who said: “South Australia is now leading the world in dispatchable renewable energy, delivered to homes and businesses 24/7.”

Not so sure that SA is leading the world, but it certainly presents as a national leader is this field.

By coming in ahead of schedule, Tesla tech billionaire Elon Musk fulfilled his promise to build the 100-megawatt facility in 100 days or provide it free. The battery is paired to the neighbouring Hornsdale Wind Farm, owned by French company Neoen.

Infrastructure spending has a big influence on the health of real estate markets - and the infrastructure spend in Adelaide is mounting, with a significant ongoing investment in improving road and rail links across the metropolitan area.

Recent announcements include funding totalling $659 million for facilities at the RAAF Base Edinburgh in Adelaide’s north to support the anti-submarine and surveillance plane, the P-8A Poseidon. These facilities are targeted for completion by early 2019.

A recent report listed extensive private sector investment in South Australia, which included a number of firms making Adelaide their headquarters.

Strike Energy has committed to relocate its headquarters from Sydney to Adelaide; French company Dassault Systemes has decided to establish its Australian head office in Adelaide; and Indian renewable energy company Enzen Global Solutions is opening its Australian head office in Adelaide.”

In addition, cyber security firm VeroGuard Systems says it will begin manufacturing in Adelaide in 2018, producing cards and software to enable hyper-secure online transactions. The company’s $57.5 million investment is expected to create 596 jobs in the first three years.