Adelaide Industrial Market
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RESEARCH Population Growth Aust: 1.6% SA: 0.8% Infrastructure—North to Lonsdale— an additional 3,000m² of As at December 2018 South Corridor advance manufacturing space which will increase the manufacturing capacity by Economic Growth The North to South Corridor is starting to 250% and create jobs for up to an Aust: 1.8% SA: 1.8% come together with the majority of additional 100 workers. projects completed. Current projects March 18 to March 19 underway are the Darlington Upgrade The unemployment rate in SA currently Unemployment Rate and Northern Connector, with expected stands at 5.9%, which is 0.7% higher completion in late 2019. The remaining than the national average as of June Aust: 5.2% SA: 5.9% sections that are yet to commence are 2019 (seasonally adjusted). This figure As at June 2019 the River Torrens to Anzac Highway and has improved from 7.3% in April 2017. “Anzac Highway to Darlington”. On Moving forward, this downward trend is Infrastructure Spending completion, the 78-kilometre North-South likely to continue as a number of major SA State Budget Corridor will reduce travel times by projects in the defence and providing a continuous non-stop manufacturing sectors come online. 2019/20: $11.9 billion carriageway from Gawler to Old Engineering Noarlunga. Furthermore, it will also Low cost of capital will Construction improve access to some of the key benefit the property market Aust: -13.5% SA: 7.8% industrial areas such as Edinburgh Parks in the Outer North. Evidence from sales transactions during March 18 to March 19 CY 2018 suggested that the low cost of Manufacturing is back capital and the abolition of stamp duty had a positive impact on the number of The closure of the 122.5ha General transactions for industrial properties Motors Holden (GMH) site in Elizabeth above $5 million. (Q2 2017) resulted in job losses across the State. The new owner of GMH site, In July 2019, the Reserve Bank of Melbourne based developer Pelligra Australia (RBA) has cut the cash rate to group, has secured tenants such as 1.00% (historical low), and also indicated Genis Steel, SA Power Networks, Sonnen there are more cuts to come in the and Levett Engineering. following months. The downward trend has taken the cash rate from 4.75% In addition, Whyalla steelworks owner (November 2010) to 1.00% (July 2019). Sanjeev Gupta (GFG Aliiance) plans to Hence, it is likely to continue to drive the revive vehicle manufacturing in Australia cost of capital down and attract more by building electric cars. The location of investment into the property market. the manufacturing site is unknown however, VIC and SA are being canvassed for potential sites, due to their Unemployment Rate history of vehicle manufacturing. (Seasonally Adjusted) Australia vs South Australia Besides that, the defence industry has 8.5% made a positive impact on the SA 8.0% economy, resulting from the $35 billion 7.5% Future Frigates contract with BAE 7.0% Systems. BAE Systems have recently 6.5% employed more than 80 graduates and 6.0% are expected to employ an additional 100 5.5% 5.0% graduates next year as the project ramps 4.5% up. Furthermore, small & medium 4.0% business such as Redarc Electronics Jun-2010 Jun-2011 Jun-2012 Jun-2013 Jun-2014 Jun-2015 Jun-2016 Jun-2017 Jun-2018 Research Analyst SA have enjoyed the flow on contracts from Jun-2009 defence projects. More particularly, Australia Unemployment Rate (Seasonally Adjusted) South Australia Unemployment Rate (Seasonally Adjusted) Redarc had expanded its factory in 2 ADELAIDE INDUSTRIAL AUGUST 2019 RESEARCH Rents, Incentives & Outlook Recent Leasing Activity Adelaide Average $95/m² Net Bldg Prime 0.5% p.a growth Term Address Region Rent Area Tenant Date (all regions) 10.0% incentive (yrs) $/m² (m²) Average $62/m² Part, 113-117 Bedford Street, Gillman IN 118 2456 5 Plasdene Glass May-19 Secondary 0.8% p.a growth 14-16 Pambula Street, Regency Park IN 82 1,285 5 King Furniture May-19 (all regions) 5.67% incentive 30 Charles Road, Beverley IW 75 7,135 5 Advanced Piping Apr-19 Limited leasing activity over 7 Rosberg Road, Wingfield IN 88 1,713 5 Stoddart Mar-19 the past six months Unit 3, 43-55 Produce Lane, Pooraka IN 110 2,807 3 Marlau Mar-19 Leasing transaction volumes remain low Part 41 Barfield Cres, Edinburgh North ON 50g 2,080 3 Wheel & Barrow Feb-19 as a result of the continuing trend of Part 51-85 Morrow Rd, O’Sullivan Beach OS 49 15,456 4 Orrocon Steel Feb-19(r) owner occupation, where in lieu of leasing their property requirements, Unit 8, 3 Selgar Avenue, Tonsley IS 80 1,222 3 Black Mango Dec-18 occupants are favouring to purchase 53-73 Churchill Road North, Dry Creek IN c65 4,319 4 Carpet Call Jul-18 their facilities. This is partly due to the 25 George Street, Green Fields IN 70 4,096 # Apex Steel May-18 historically low cash rate, coupled with the abolition of stamp duty, which further encouraged tenants to become owners. The most sought after properties to lease 10,000m²), building construction (circa Adelaide Industrial Prime Rents are those within inner metropolitan areas $/m² net face, 2009-2019 with good access to major transit routes. 10,000m²), pipe manufacturing (circa By precinct 3,000m²) and electrical manufacturing 160 The majority of leasing transactions have (circa 3,000m²). been located in the Inner North. This is 140 largely due to the size of the precinct in Rents have remained 120 comparison to other precincts. A recent steady leasing transaction occurred at 113-117 100 Bedford Street, Gillman. The tenant, Rents have remained steady over the 80 Plasdene Glass occupies a brand new past 6 to 12 months. Despite this, properties within inner metropolitan office/warehouse of 2,456m², the deal 60 was struck at a face rental rate of $118/ areas with good access to major transit 40 m² p.a. net for an initial term of 5 years. routes have continued to be met with Jul-09 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-18 Jul-19 Jul-17 steady leasing demand. Average prime Jul-10 incentives remained unchanged at INNER NORTH OUTER NORTH INNER SOUTH Furthermore, Advanced Piping OUTER SOUTH INNER WEST Systems— a supplier of Polyethylene approximately 10%. fittings and piping systems for mining and industrial applications recently Adelaide Industrial Rents Adelaide Industrial Secondary Rents vacated from 5, 7 & 9 Benjamin Street, St $/m² net face, 2009-2019 $/m² net face, 2009-2019 Marys due to expansion. The tenant was Prime vs Secondary By precinct previously occupying a GLA of 1,823m², 110 85 and has since leased 30 Charles Road, 80 Beverley, formerly occupied by Grace 100 75 Logistics and comprises a GLA of 90 70 7,135m². The deal was struck at a 80 65 commencing rental rate of $75/m² p.a. 60 net of GLA for an initial term of 5 years. 70 55 60 50 The outlook for tenant demand is looking 50 45 positive with several briefs for space in 40 40 the market for office/warehouse Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Jul-19 accommodation ranging from 3,000m² to Jul-09 INNER NORTH OUTER NOR TH INNER SOU TH 10,000m². Notable requirements are from PRIME SECONDARY OUTER SOUTH INNER WEST industries such as logistics (circa 3 Holden site has finally settled The 122.5ha General Motors Holden (GMH) site has finally settled in January 2019 after an extended settlement with a due diligence period (approximately 13 months). The site was transacted for circa $55 million to a Melbourne based developer Pelligra Group with a portion (approx. 30%) on a long term leaseback to GMH utilised for parts and service. The Pelligra Group plans to transform the site into a multi-purpose business precinct, known as ‘Lionsgate Business Park’. Since taking possession of the site, Pelligra Group has leased a portion of the site to tenants including Genis Steel, SA Power Networks, Sonnen and Levett Engineering. $535 million Naval Shipyard is well underway One of the most significant developments in SA is the $535 million Osborne Naval Shipyard. The property is currently under construction and will comprise four (4) new major buildings, with the largest building being approx. 13,500m² (180m x 75m) and 55 metres in height (equivalent to 14 storey Metcash facility built distribution centre. On completion building). The development is expected (scheduled for mid-2020), Metcash will to be completed by March 2020 and will Another major development is the be relocating their existing premises be utilised for shipbuilding infrastructure former Bianco steel fabrication facility, from Kidman Park. In 2018, Metcash for the $35 billion future frigates project. located at 600 Main North Road, Gepps entered a long-term agreement with the Cross. The property has recently majority of the Foodland supermarkets Over the past six months, land values transacted off-market to Charter Hall owners in SA which includes the have remained steady for all precincts. for circa $35 million. Prior to the Romeo’s and the Chapley’s—excluding Despite this, the high underlying land settlement, the vendor had secured an Drakes, which are constructing their value in the inner west has driven a ASX listed tenant (Metcash) with plans own facility in the Outer North.