APPD Market Report Article

Adelaide

February 28, 2022

5.6%

AUD 94.4

Rents
Rising

Occupier activity decelerates in the final three months of 2021

  • While only 16,500 sqm of gross take-up was recorded in 4Q21, annual gross take-up in 2021 was still the second highest on record since JLL began tracking the market in 1980 (259,900 sqm). The manufacturing sector was the most active industrial space user in 2021, accounting for 61% of the annual gross take-up total (157,500 sqm).
  • Major occupier moves recorded over the quarter were retailers Amazon (4,300 sqm) and Living By Design (4,300 sqm) leasing space in Cavan (North East) and manufacturer Joyce Foam Products committing to a new 8,000 sqm design & construction facility in Edinburgh North (Outer North).

Supply completions are low in 4Q21

  • Only two developments reached practical completion in 4Q21, totalling 7,200 sqm. Despite the low completion figure over the quarter, annual supply reached 108,000 sqm – exceeding the 100,000 sqm threshold for consecutive years and only the second time over the last decade. The Outer North precinct accounted for the largest proportion of new supply in 2021 (45%).
  • There is currently 51,400 sqm of new supply currently under construction in the pipeline, expected to be delivered over the next 12 months. An additional 118,300 sqm of projects have development plans approved or have submitted plans to council. All of these projects are located in the Outer North or North West precincts.

Annual investment volumes reach a record high in 2021

  • Average prime net rents increased across most precincts in 4Q21. Ongoing occupier demand for modern, efficient warehouse space has resulted in lower vacancy, and speculative supply still remains low. The largest quarterly increase was in the Outer North (8.11% q-o-q). With the exception of the Outer South, annual growth of between 5.50% and 11.00% has been recorded across all precincts.
  • Investment demand for industrial assets in Adelaide continues to increase. There was AUD 220.5 million of assets sold in 4Q21 across 14 transactions. The largest transaction in the quarter was the AUD 71.3 million sale of Netley Commercial Park. Charter Hall’s unlisted Prime Industrial Fund (CPIF) purchased the asset from syndicator Harmony Property Investments on an initial yield of 4.45%.

Outlook: Robust occupier and investment demand to continue in 2022

  • Anecdotally, leasing and land acquisition enquiry volumes reported by JLL operatives has increased significantly in 2021. This is expected to translate into positive gross take-up in 2022. This demand is likely to be driven by the manufacturing, retailing, and transport and logistics sectors. On the back of this, new pre-lease and design & construction led supply is expected to increase.
  • Investment volumes will be dependent on the opportunity to purchase assets with off-market approaches to owners expected to become more frequent. With the weight of capital looking to be placed in the Adelaide industrial market over the short term, we expect the yield compression cycle to continue in 2022.

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

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