How will Holden’s closure impact Adelaide’s industrial sector

March 31, 2014 / By

The number one question I have been asked over the last few months is … what will be the impact of Holden’s closure on Adelaide? There has been some hysterical reporting and simply outrageous predictions on the subject recently. So let’s try and dispel some of the myths.

Firstly, an economic catastrophe is not around the corner. According to Deloitte Access Economics, the car manufacturing sector makes up less than 1.5% of South Australia’s economy. SA will feel some pain, but some forecasts have been grossly exaggerated.

Secondly, there will be job losses, but again this needs to be put in perspective. Five years ago Holden employed approximately 3,200 people and over the past five years that figure has almost halved, without dramatic consequences. Furthermore, the job losses to come will occur in far more favourable economic conditions.

There is no doubt there are some component suppliers and manufacturers that will close their doors, and it is this downstream effect that will have the greatest impact on the industrial property sector. It is important to note that the current circumstances are not unexpected and businesses have been in the process of diversifying for some time. However, closures are inevitable.

About 10 years ago the SA government released land adjacent to the Holden site for use by the component suppliers and manufacturers. The Automotive Supplier Precinct has direct access to the Holden plant with supporting infrastructure. As a result, the vast majority of businesses affected by Holden’s closure are confined to one small and defined area of the Outer North precinct.

As the closures roll through, it is expected that there will be an increase in vacancies in the Supplier Precinct. The resulting market imbalance in this defined area will see properties leased and sold at prices below that prior to Holden’s announcement.

However, JLL expects this impact will be relatively localised. The Outer North precinct has for several years now provided competition for Adelaide’s traditional industrial areas, yet these areas have shown resilience, with occupiers unwilling to compromise on location.

Even other industrial space on offer in the Outer North, such as the STC logistics Intermodal Freight Centre and the Vicinity Industrial Estate, will be relatively protected with both arguably far better suited to transport and logistics use, the current and future industrial growth sector. Cheaper space will soon be on offer nearby, but JLL expect transport and logistics tenants will be unwilling to accept the level of compromise required to genuinely consider the Supplier Precinct.

So what will be the impact of Holden’s closure? For the vast majority of industrial space in Adelaide JLL does not expect any dramatic effect. For those institutional and private investors that own sites within the Supplier Precinct itself, the future in the short term is uncertain. But it is important to remember that right next door there is a 120 ha site and manufacturing facility for which a new use may be just around the corner.

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