Australian Industrial Outlook

July, 2018

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Australia’s industrial property market is expected to continue to be positive over the short-term.

Australia’s industrial property market is expected to continue to be positive over the short-term.  Growth is likely to largely be driven by the high volume of export and import sales.  Retail trade growth continued to reduce but is still driving solid demand for storage and distribution space due to new entrants to the market (in particular online retailers) and firms continuing to look for efficiencies in delivery, access to infrastructure and storage.

Supply of industrial stock increased over the year to June 2018.  Supply mainly relies on owners obtaining pre-commitments, although speculative development has increased in some areas.  This has largely been matched by demand prior to completion, however, it has resulted in a rise in backfill space.  Supply is set to continue at solid levels in the short-term with approval of industrial space remaining high in 2018.

Demand for industrial property should remain positive over the short-term. In particular, the merchandise trade, construction and logistics sectors are likely to drive growth in demand for processing, distribution and storage facilities within most markets and particularly in areas of improved infrastructure.

While expected to remain subdued, in some states, rental growth should improve over the short-term, in selected submarkets, in particular inner city locations where infill space is sought by e-commerce firms.

Investment market activity is expected to be moderate over the short-term with many landlords looking to hold assets.  There is scope for investment yields to tighten on selected assets over the next 6-12 months.  However, this is likely to be constrained by rising 10-year bond yields.

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