APPD Market Report Article

Adelaide

May 26, 2024

Annabel McFarlane, Head of Strategic Research, Australia

10.1%

AUD 125

Growth
Slowing

Quarterly gross take-up falls q-o-q to Q1 2024

  • Occupier demand for larger warehouse persisted. However, activity remained limited by availability. As a result, 5,385 sqm of gross take-up was recorded in Q1 2024. This figure is significantly below the average quarterly gross take-up recorded over the last two years.
  • There has been a lack of large occupier moves in the Adelaide market, with only one occupier move in Q1 2024 above 3,000 sqm. Over the quarter, SHAPE Australia secured a long-term lease to occupy 5,385 sqm at Unit 1, 281-301 Grand Junction Road, Ottoway in the North West precinct.

New supply increases in Q1 2024

  • There was 14,400 sqm of new supply added to Adelaide total stock in Q1 2024 – an increase in supply delivery compared to the previous quarter. There are currently 12 major developments under construction totalling 161,300 sqm, with the latest expected to deliver in Q4 2025.
  • The largest completion of the quarter was a 9,500 sqm freight and distribution facility for pre-lease occupier DHL. The project was developed in Netley, in the Inner West/East precinct. The facility comprises 900 sqm of office and 8,600 sqm of warehouse with ancillary buildings.

Average prime net rents increase in Q1 2024

  • Average prime net face rents increased across all precincts in Q1 2024, and incentives increased in the Outer North precinct. The continuing trend with occupier demand outpacing supply has led to a rise in asking rents.
  • Average land values continued to increase in Q1 2024 as demand from opportunistic owner-occupiers boosted demand for development sites. Average land values increased between 2.9% and 12.0% over the quarter.

Outlook: Rental growth to slow in the short to medium term

  • As broader economic volatility relating to interest rates and inflation are expected to normalise in 2024, occupier demand is also expected to improve over the next 12 months. Despite this, speculative supply from developers is likely to stay low as costs of construction material and labour remain elevated.
  • Low supply is expected to support ongoing rental growth over the short term, albeit at a slower rate. The yield decompression cycle is expected to conclude by the end of 2024 with more certainty around broader economic conditions.

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

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