APPD Market Report Article

Adelaide

December 1, 2021

0.0%

AUD 89.4

Rents
Stable

Occupier demand continues at robust levels

  • Quarterly gross take-up totalled 63,000 sqm across five occupier moves in 3Q21. There were two pre-lease moves over 20,000 sqm in the quarter, both by steel fabricating firms. Firstly, The Apex Group committed to a 15-year, 21,900-sqm deal in Direk in the Outer North precinct. Secondly, BlueScope Steel committed to a 20,000-sqm deal at the Adelaide Airport in the Inner West/East precinct.
  • Total gross take-up for 2021 totals 243,400 sqm, representing the second highest annual gross take-up total on record in only nine months of the calendar year. The manufacturing sector has been the most active occupier, accounting for 61% of the YTD gross take-up total. The transport, postal & warehousing sector is the second most active, accounting for 24% of the annual total.

The supply pipeline increases as pre-lease demand improved

  • There were four supply completions recorded in 3Q21, totalling 38,300 sqm. All of the new supply was pre-committed. There are currently four projects under construction, totalling 21,300 sqm. One of which is being built speculatively (4,200 sqm).
  • An increase in pre-commitment and design & construction deals has resulted in an expansion of the future supply pipeline. There is currently 97,700 sqm of projects with plans approved and a further 80,900 sqm with plans submitted or in early planning.

Land values increase as development land becomes scarce

  • Net face rents held firm in 3Q21 as leasing deals generally landed within existing ranges. However, land values continued to increase in the quarter. Development land is becoming more scarce with competing usages, like residential, driving prices in the inner suburban areas and a deepening buyer pool comprising both developers and owner-occupiers pushing prices higher in the outer precincts.
  • Investor demand continued in 3Q21, resulting in further compression of yields across both grades in all precincts. Upper end prime yields in the North West precinct tightened to 4.75%, representing the first sub-5.0% industrial upper end yield recorded in the Adelaide industrial sector since JLL began tracking the market in 1980.

Outlook: Both occupier and investor demand to remain positive in 2022

  • The COVID-19 pandemic has supported the growth of e-commerce and broader spending in the retail sector. This growth is expected to support demand from retail, wholesale and transport, logistics and warehouse occupiers. Emerging employment sectors like defence and health are set to be additional drivers of growth over the medium term.
  • Investor demand for industrial assets is very strong and is likely to translate into robust transaction volumes and a further compression of yields. Additionally, a growing scarcity of development land is likely to support land values growth in 2022 as developers increase landbanks and owner-occupiers look to upgrade facilities through new development.

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

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