Commercial Month in Review - June 2021 - Herron Todd White
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Commercial Month in Review June 2021
A message from our CEO
Month in Review
June 2021
As we reach the end of FY21, Australians continue to be tested in ways we’d never imagined.
As we close the month of June, five of our states Information Security certification, placing HTW as In the residential section, our expert teams deliver
and territories have been in lockdown for a total one of the most robust, secure, and quality-forward their half-time scorecard of Australia’s diverse real
of 24 days. This is a reminder that Australia is not valuation firms in the nation. This commitment to estate markets. Our professionals also reveal some
yet through this period. However, I’m buoyed by quality cannot be released without the collective thoughts on how markets might proceed over the
the fact we can come together and support one effort of our people around the country. Our remainder of 2021.
another during the challenges and, overall, remain processes and systems ensure that we continue to
Among the excellent stories on offer this month are:
optimistic about the future. provide our clients with market-leading solutions.
◗ Sydney – North Shore prestige market driven by
The concept of being stronger together is It is due to the diligence of our people and our
ex-pat demand;
something we have always adopted at Herron Todd genuine commitment to the business that positions
White, but even more so of late. this commitment to quality at the forefront of our ◗ Newcastle – growth in the median house price
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service offering. Quality solutions for our clients, outperformed all capital cities;
In recent weeks I was pleased to announce the
quality solutions and processes for our people, and
CEO
merging of our South East Regional Australia and ◗ Shepparton – ex-Commission properties gained
a quality support structure.
Melbourne entities to create Herron Todd White approximately 80 per cent in value in the past 12
VIC/TAS. This latest amalgamation follows multiple It is a priority to ensure that we have rigor within months.
Western Australian operations consolidating to our business to respond and remain at the forefront
Our abridged rural submissions have also
create the single Herron Todd White Western of quality client lead solutions.
adopted this mid-year theme and discussed how
Australia entity in 2020, along with New South
Our June edition Month In Review submissions key primary production property markets have
Wales and the ACT in 2019. This exciting merger is
offer an opportunity to assess the current state of performed so far in 2021.
set to improve client services, and create further
the market, and prepare for what’s to come.
operational efficiencies across the business. Please enjoy this latest addition of
The commercial section sees local area specialists Month In Review.
Our program will see more regional offices
discuss unrealised investment opportunities within
integrate with capital city operations and create Gary Brinkworth
the industrial sector.
large single state entities. This will significantly
improve the company’s operation and its appeal to Stories include:
employees, partners, and investors. I look forward
◗ Sydney – lack of industrial stock continues to
to revealing more in the coming months.
drive prices;
In other news, As part of Herron Todd White’s
◗ Brisbane – continued outperformance of industrial
commitment to quality, we are proud to announce
compared to other commercial sectors; and
that we have now received formal ISO9001
certification. This important international standard ◗ QLD regional – across the board strengthening in
for quality builds on our existing ISO27001 industrial markets continues.
2
Tax Deduction for Investment
Month in Review
June 2021
Properties: What can you claim?
Belinda Botzolis
The start of the financial year doesn’t have the same excitement as the start of a new
calendar year.
No hashtag #newfinancialyearresolutions trending on social media and no New
Financial Year Eve party hangovers on July 1st. But what we do have is a clean slate. A
time to start again, financially speaking. It’s also a chance to begin prepping information
which will help an accountant lodge your tax return.
As a Property Valuer and Registered Tax agent the best advice I can give property
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investors is this – it pays to do your homework on exactly what you can and cannot
claim against your taxable income. Because accounting for every dollar is important
and will prevent you from paying more tax than you should.
BELINDA BOTZOLIS
Senior Property Advisor at HTW
3
S
The big question is, however, do you know what Month in Review
those deductions are and how to claim them? It’s your money, it’s your right to claim and if you make the June 2021
When it comes to investment properties there are choice to buy an investment property, then you should claim
many considerations. For example, whether you
own the property outright, rent out part or all of it,
what you’re entitled to.
or even have a commercial owner occupier asset,
Claiming the depreciable loss of a property via It’s important to do your homework on the tax
there are still many items you can claim. It’s not
a Tax Depreciation Schedule is, still commonly benefits, rules and guidelines when it comes to
just investors who are negatively gearing their
misunderstood. As a result, a substantial portion of property investment. It’s also important to talk
investment property that enjoy all the deductions.
depreciation goes largely unclaimed, so there could with your accountant or financial advisor, not just
Every investor has the same opportunity to claim
be literally thousands of dollars in deductions that at tax time but well before you buy an investment
tax benefits, they just need to understand what
you are failing to take advantage of. property. Utilising these professionals ensures
they are.
you’ll understand exactly what your financial
I regularly hear the misconception that, ‘only new
The most commonly claimed deductions are options, benefits and risks are.
properties qualify for depreciation’, or ‘the amount
the interest portion (not the principle portion)
you can claim in depreciation on an older property Herron Todd White are more than just property
of mortgage repayments, along with repair
is not worth the hassle of obtaining a report’. valuers. We are fully qualified and accredited
and maintenance, managing agents fees,
property advisors, in all areas and class of
fees associated with leasing the premises, The fact remains any property built after the
property. If you or someone you know needs Tax
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landlord insurance, building insurance, water 16th of September 1987, regardless of condition,
Depreciation advice on your investment property
and council rates, strata fees and all directly qualifies for depreciation. You have 40 years
please do not hesitate to contact us at tds@htw.
related expenses suitably associated with the to claim from this date and I would recommend
com.au, as we have fully qualified experts who are
investment. looking into getting a Tax Depreciation Report as
ready to help.
soon as possible. Also, for any property built before
Some costs are tax deductible in the year you
September 1987 that has some level of alterations
incur them, whereas others can be used to reduce
or renovation undertaken (such as a new bathroom,
your profit, or ‘capital gain’ – think Stamp Duty
new kitchen, repaint or hard landscaping works
and Conveyancing fees. It’s also important to
etc.) you are entitled to claim depreciation on that
understand that by owning a rental property, any
capital improvement. No matter how large or small
money earned or spent will need to be recorded
the amount you claim in depreciation, it’s still better
and kept, no matter how large or small the sum is.
than not claiming anything at all. It’s your money,
So basically, if you’ve spent money and claimed it,
it’s your right to claim and if you make the choice to
then you must keep an accurate record of it for at
buy an investment property, then you should claim
least five years.
what you’re entitled to.
The abovementioned deductions are fairly common
The best way to have your property correctly
knowledge. Most investors are well versed and
assessed for depreciation is to engage the services
educated in the idea of investment strategies and
of a fully qualified Tax Depreciation Specialist
what can and can’t be claim as deductions.
who is also a registered Tax Agent. That way what
But there is one area where investor tax benefits you claim will be in accordance with the ATO’s
continue to be underutilised. guidelines, and no deductions will be overlooked.
4
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National Property Clock: Industrial
Month in Review
June 2021
Entries coloured purple indicate positional change from last month.
Gold Coast
PEAK OF
Brisbane MARKET
Ipswich
Southern Highlands
Approaching Starting to Central Coast
Peak of Market Decline
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Sunshine Coast
Adelaide Illawrra
Ballina/Byron Bay Lismore
C’berra/ Q’beyan Mackay RISING DECLINING Orange
Coffs Harbour Newcastle MARKET MARKET Toowoomba
Echuca Sydney
Hobart
Bundaberg Melbourne
Cairns Mildura
Geelong Perth Start of Approaching Alice Springs
Recovery Bottom of Market Darwin
Gladstone Rockhampton
South West WA
Hervey Bay Townsville
Horsham BOTTOM OF
MARKET
Liability limited by a scheme approved under Professional Standards Legislation.
This report is not intended to be comprehensive or render advice and neither
Herron Todd White nor any persons involved in the preparation of this report
accept any form of liability for its contents.
5
New South Wales
Month in Review
June 2021
Overview site is relatively unimproved industrial land that has businesses look to take advantage of low interest
Industrial property markets have, on the whole, an area of approximately 3,000 square metres. The rates and move from tenancy to owner-occupation.
thrived throughout the past 18 months. While property sold in December 2019 for $3 million. The Combined with a growing need for warehousing
this has been an excellent outcome for property property was resold a few weeks ago at auction for and improved business conditions, we are seeing a
owners, anyone looking to invest will be faced with $4.65 million, a 55 per cent increase in less than 18 growth in both capital values and rental rates.
challenges. months.
Earlier in the year we noted that demand from
This month, our commercial teams reveal what Another example is a site in Lansvale. The site investors was slow but they too are now more
they consider to be the prime industrial property is also relatively unimproved and has an area of active in the market although are often priced out
investment opportunities throughout their service approximately 4,800 square metres. The property by owner-occupiers who are willing to pay more to
areas. sold in May 2019 for $3.77 million. The property secure a property.
was resold in early May at auction for $5.5 million,
Opportunities still exist in overlooked areas or
Sydney a 46 per cent increase.
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where there is new development. The central
The industrial market in Sydney has been growing
west has seen some new supply in suburbs such
in leaps and bounds in 2021 and has shown
as Chullora and Enfield. Entry level strata units in
the most promise following the lockdowns and
areas such as Penrith and Blacktown could also
uncertainty brought about by COVID-19. This
present an opportunity to secure a property that
growth has made it most certainly the asset to
also benefits from proximity to major roads.
watch this year. We are noting a shortage in supply
that is seeing values being driven up and the Overall, we are optimistic about how the market
competition between buyers has become quite will perform over the remainder of the year. The
fierce. strengthening prices do not seem to be showing
signs of slowing.
Whilst all areas of Sydney are doing very well at
present, the industrial precincts closest to major 23456789170454 455775
Angeline Mann
infrastructure have performed best. The industrial Commercial Director
precincts along the M4, M5 and M7 motorways
Fuelling current demand is the significant lack of
have soared in price and demand.
supply of industrial properties across the Sydney
An example of this is a site in Chipping Norton. The area along with increased demand as more
Earlier in the year we noted that demand from investors was slow but they too are now more
active in the market although are often priced out by owner-occupiers who are willing to pay
more to secure a property.
6
Victoria
Month in Review
June 2021
Melbourne The Melbourne industrial market has, in effect, become hot
The global Coronavirus pandemic event has been
an unprecedented time with multiple lockdowns
property over the past 18 months.
in Melbourne dampening confidence. Whilst those
lease expiry profile, strong tenancy covenant Should this trend continue, vacant industrial
effects have been significant in some commercial
and low maintenance improvements will remain land would present as the best value growth
real estate sectors, the industrial market has
in strong demand. This is particularly so for opportunity for investors or owner-occupiers.
been relatively resilient. The Melbourne industrial
prime properties. For city fringe and inner
market has, in effect, become hot property over Of particular note this month is an industrial
suburban industrial properties where there is a
the past 18 months. development site in East Bendigo that has just hit
high underlying land value and redevelopment
the market. 110-128 Strickland Road, East Bendigo
With more people working from home and online potential, demand and pricing is expected to hold
is 6.6 hectares of Industrial 1 Zoned land and is
shopping for supermarket items, fashion and up and show continued appreciation.
currently listed for $4.75 million. It is one of very
household goods trebling since March 2020, the
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On the back of this, demand is expected to remain few remaining large industrial infill sites suitable for
demand for industrial warehousing and serviced
at unprecedented levels and the shortage of new further development. In the current market, a site
developable land has continued to rise and outstrip
space to meet that demand would indicate further such as this will provide a unique opportunity for
performance of their counterparts. Multiple
capital value uplift. further development.
Australian Real Estate Investment Trusts have been
re-positioning their portfolios towards the industrial Nick Michael Our office will continue to monitor this listing and
Director
sector, with this combination expected to put any further developments as we eagerly await the
further pressure on capitalisation rates within the outcome and market insight it provides.
prime industrial market.
Bendigo
The industrial sector in Bendigo has remained Trent Goodmans
Property Valuer
Developers have also struggled to keep pace with stable despite negative impacts in other sectors
demand from logistics and e-commerce occupiers of the commercial property market from the
and given the scarcity of available serviced COVID-19 pandemic. Agents are reporting that
industrial land within proximity of major transport there has been strong interest in the industrial
linkages, we have seen strong upward pressure property sector from both owner-occupiers
on industrial land values throughout the past 12 and investors. With a limited supply of listings,
months. This is expected to continue throughout the result appears to be price growth and yield
2021 and land values have broken through the compression. There is a notable shortage of
$500 per square metre of land area barrier (across vacant industrial land in Bendigo at present and
the western industrial market in particular). no new supply coming online this year that we are
aware of. This shortage has led to some existing
For industrial investment properties, yields are
sites being advertised and sold well above what
likely to remain tight in the current low interest
was previously considered an appropriate range.
rate environment and properties with a long 22342567891077970 817110 7
7
Queensland
Month in Review
June 2021
Brisbane attempt to capitalise on the current depth of both shorter WALEs or are carrying some vacancy. In
The year to date has seen Brisbane’s industrial the occupier and investor market. particular, the south-western corridor has seen
investment market go from strength-to- a flurry of activity over the past 24 months as
In the institutional space, investors and super
strength, with increasing investor demand investors seek to uncover opportunities that have
funds have turned to Brisbane in their hunt for
tightening yields to record levels. This frenzied to date been overlooked.
yield. Brisbane assets offer attractive returns
demand is largely driven by the low interest
(circa 4.25% to 5.25%) relative to their New South The graph below illustrates the historic sales
rate environment, however the investment
Wales and Victorian counterparts (circa 4.0% to volumes and values over the past 10 years:
characteristics of prime industrial real estate,
4.5%) whilst offering diversification
in particular the long WALE and secure income
benefits for the funds’ portfolios.
streams (relative to the COVID impacted cash-
flows of other asset types), have been a major Despite the current environment,
contributing factor to the current yield trend. savvy private investors have been
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Capital growth has been the primary component able to uncover some accretive
of total return for this asset class, as market investment opportunities. A
income growth is constrained by increasing common theme amongst these
incentives offered by landlords competing for opportunities is that they are off-
covenant and tenure. market deals. In securing an asset
off market, these investors are
Whilst demand for quality industrial assets remains
avoiding the competitive bidding
extremely strong, particularly for well-located
tension created by a full and proper
properties with long-term leases and strong lease
marketing campaign, however it is
covenants, secondary properties continue to
becoming difficult as most vendors
see long lease up periods and are generally less
are acutely aware of the benefits of
attractive in the current market. We have seen
an on-market campaign. We have 2 3456789 1607886
prime assets transacting in a general yield range of
also seen investors moving up the
between 5.00% and 6.50%, with secondary assets
risk curve to generate return. They have achieved As illustrated above, the total number and value
generally achieving softer yields in the market. This
this by exploiting external expertise to reposition of sales fell in 2018, which made for a slower start
surge in demand has seen increased development
secondary assets to unlock capital. These assets in 2019. This was primarily due to a shortfall in
activity as experienced and also novice developers
are typically located in non-core locations and have supply of quality industrial assets. After the federal
election in May 2019, there was an increase in sales
volumes. Stronger sales activity was expected to
The industrial market has proven quite resilient, rebounding continue throughout the first half of 2020 with the
from the COVID-19 trough of 2020 that shocked investors in final number being the highest number of sales
all other markets. since 2015.
8
Investment yields for high quality assets continue years and highlights the response to strong buyer Month in Review
to trend further into the 5% range. An example of demand at present. June 2021
a major transaction is a property in Eagle Farm, a
The current boom in construction of new
traditionally well sought-after location within the
complexes has even reached Tugun, where the first
TradeCoast. The property had a 5.6 year lease term
industrial unit development is slated for 71-77 Boyd
and transacted at circa $8 million with an analysed
Street and is currently going through the approval
yield of 5.25%.
process.
The industrial market has proven quite resilient,
There is a lack of available sites for development
rebounding from the COVID-19 trough of 2020 that
in the region, unless a premium price is paid
shocked investors in all other markets. Industrial
to secure properties off-market, which is one
assets have found favour as investors search for 2345678691840646 64696994
strategy being implemented by some developers.
well leased, quality assets due to the lower risk
For the passive investor, potentially the best
profile these properties offer, coupled with the In terms of recent transactions, of note is the sale
opportunity for value growth in the market is in
very low cash rate. To date there is no evidence of of 36 Central Drive, Burleigh Heads, a multi-unit
the small to medium size freestanding industrial
diminution in industrial values for modern, either strata titled industrial complex which sold in
property segment. This is due to the price point
owner-occupied or well leased properties, but February 2021 at $4.2 million, reflecting a circa
of such properties generally reflecting good
rather a firming in values is quite evident across the 5% net yield with average lease expiry of circa
value in comparison to industrial strata units.
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various industrial sectors. three years. The sale is a strong result, however
Although prices have also exceeded peak levels,
Isaac McConnell the yield is also reflective of its multi-unit nature
they have generally not been elevated to quite
Valuer with strata divestment potential, which generally
the same degree. This is predominantly due to the
translates to a lower cashflow risk if any tenancy
relative affordability of units which are attractive
Gold Coast was to become vacant.
to small business owner-occupiers or small-scale
The industrial market on the Gold Coast continues
investors.
to perform above expectations and has weathered
difficult economic conditions over the course of At the time of writing this article, there were
2020 through to 2021 quite convincingly. Buyer only five tenanted industrial properties on the
appetite for modern industrial units in the smaller Gold Coast listed on www.realcommercial.com.
range has been voracious on the southern Gold au between the search range of $1.5 million and
Coast in particular where there is limited supply. $5 million. The slim pickings are a stark reminder
Recent developments in Burleigh Heads have of the current tight state of the market. As an
fully sold out in a short time frame with limited alternative, it may be necessary to seek willing
further projects in the pipeline. However, there vendors off-market which is a hit and miss strategy,
is one notable large development planned for but could have a big upside.
314-328 Burleigh Connection Road which has 23456789104964906461 9649610691014
There is one notable property, utilised for food
recently been approved for three medium size
processing, at 57 Newheath Drive, Arundel asking
and two large industrial/showroom units at the Ryan Kohler
$3.25 million, with a new five year lease. This
front of the site, 10 self-storage units and 31 small Director
price would reflect a 6% net return (assuming all
industrial warehouse units. A project of this size
outgoings are recoverable).
has not been undertaken in the area for many
9
Bundaberg appears to have experienced an Month in Review
Townsville Rockhampton absorption of vacant industrial stock, however June 2021
Townsville’s industrial market continues to show In the Rockhampton, Gladstone and Central
rental levels appear to be holding firm.
positive signs on the back of optimistic growth in Highlands industrial space, purchasers and
the mining sector and a continued focus on jobs tenants have generally trended towards better Whilst owner-occupiers are still the most active for
growth. quality buildings. Modern format industrial vacant industrial properties, there appears to be a
buildings that provide good clearance and good reasonable level of demand for leased investment
The majority of sales over the past 12 months
utility of both the building and site are preferred stock with recent evidence suggesting market
have occurred in the sub-$1 million price bracket
rather than older, low clearance industrial yields of circa 8% depending on remaining lease
underpinned by owner-occupiers.
buildings with limited site utility. term and quality of the overall property.
There are currently some good buying Ben Harnell
The best opportunity for growth remains in
opportunities in this sector given that we are Property Valuer
buying vacant industrial properties with broad
coming off a low base. Entry level freestanding
tenant appeal and converting them to a tenanted
sheds are priced around $500,000 to $600,000. Mackay
investment. Investor appetite remains for tenanted
There are also good opportunities in the sub $3 Paget remains a premier industrial location in
properties over vacant properties, but, as always,
million price bracket for upgraders and investors. regional Queensland. The best buying opportunities
the tenant profile and lease covenant remain
With the increased activity in the mining sector, for value growth are modern, heavy engineering
central to investors’ decisions on yield and price
support service industry is likely to experience workshops with large site areas and lower site
points. Regarding market segmentation, owner-
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growth resulting in additional space requirements. coverages. There are however very limited
occupiers are generally active up to $1.5 million and
Areas such as Shaw, Bohle and Mount St John listings at this time. In recent years, these types
investors are active up to $5 million, however they
are established industrial precincts that are well of properties have been marketed for sale around
are most active up to $2 million.
located in terms of transport connectivity and offer the same time that new lease or option terms are
modern sheds. Greg Williams agreed to provide longer unexpired lease terms,
Director
greater certainty and lower risk to investors. Yields
There are currently many factors at play in the
demonstrated over the past two years have been
market including historically low interest rates and Wide Bay around 8.0%, however because of tightening yield
significant government stimulus targeting certain The industrial property market is starting to
levels in the capital cities, it is likely that yields will
sectors in the economy (including the property demonstrate a broad improvement in market
firm within this asset as investors get priced out of
market). Locally we have experienced a relatively conditions, with many factors influencing this
the metropolitan markets.
sustained period of business positivity, increased trend.
sentiment surrounding the mining sector, jobs We notice that local owner-occupiers are beginning
Hervey Bay is experiencing a significant reduction
growth and falling unemployment. Whilst not to take advantage of firming yields and rising
in vacancies to a very low level. Local agents are
creating a break-neck speed of market acceleration, investment property values by offering their
reporting low stock availability which has the
these factors along with longer term prospects properties for sale on a lease back basis. In these
potential to increase rental levels, however this is
of on-shoring manufacturing may influence the situations, it is important for investors to consider
yet to be demonstrated.
market over time.
Jason Searston
Director The industrial property market is starting to demonstrate a broad
improvement in market conditions, with many factors influencing
this trend.
10whether the lease back rent is at an affordable ◗ Lot 11, 57 Heinemann Road, Wellcamp: $7.2 Month in Review
market level and has not been pumped up to million in November 2020. A modern industrial June 2021
artificially create a higher sale price. facility on 1.62 hectares with a lettable area
Greg Williams of 3,956 square metres. Sold with a lease to
Director NuFarm/Croplands with an unexpired lease term
of 7.80 years. Passing net yield of 6.97%.
Toowoomba ◗ 275-283 McDougall Street, Glenvale: $23
Demand from investors continues to be strong with
million in September 2020. A modern industrial
premiums achievable for assets with good tenants
facility on 3.5 hectares with a large office
on long lease terms. In previous years, net yields in
component. Lettable area of 6,471 square
Toowoomba have ranged between 8.0% and 9.0%
metres. Sold on a leaseback basis for an initial
for fully leased properties. Recent sales however
term of nine years. Passing net yield of 6.74%.
indicate a firming of these yields for properties with
quality tenants and a strong lease expiry. Whilst the investor market is strong, anecdotal
evidence suggests leasing enquiry has been
Major sales of note in Toowoomba over the past
subdued which tends to have a negative impact on
year include:
vacant or owner-occupied properties with extended
◗ 339-351 Anzac Avenue, Harristown: $8.5 lease-up periods applied for valuation purposes
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million in January 2021. A modern industrial when assessed on a vacant possession basis.
facility on 2.17 hectares with a lettable area of
The reduced enquiry level is reflected in higher
3,286 square metres. New lease to Savanna with
vacancy levels observed in the Toowoomba
an unexpired lease term of 4.54 years. Passing
industrial precincts and a trend towards increased
net yield of 6.88%.
incentives offered to attract tenants.
◗ 13-17 Kimberley Court, Torrington: $3.4 million Ian Douglas
in February 2021. A semi-modern industrial Director
facility on 1.49 hectares and a lettable area of
1,230 square metres. Sold with a lease to Lindsay
International with an unexpired lease term of
4.07 years. Passing net yield of 7.12%.
234256789100668 06990800096
11South Australia
Month in Review
June 2021
Adelaide
The industrial market continued solid performance
throughout the start of 2021. The demand for
industrial space has remained steady, with long-
WALE, high quality assets drawing a lot of investor
interest. Land sales have also been on the rise in
the state with spec building also becoming a factor
during the first half of this year.
Although demand has been high, there are still a
number of opportunities in the industrial market
at either end of the scale. At the higher end of the
investment market, 28 Park Avenue, Woodville
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North is offered for sale through Raine and Horne
Commercial with a net rental income of $479,874.
2345678910654391450555479458645035 945446 95
The property is leased to Viridian Glass – one year
into a five- bvyear term with one right of renewal
Our last industrial update touched on the is leased to the Light Regional Council for $20,800
of five years. The property features over 4900
popularity of Tonsley as an increasingly sought- per annum (including GST) until August 2024
square metres of improvements and 800 square
after industrial hub in South Australia. There are and comprises 566 square metres of warehouse
metres of canopy on a substantial site of 13,450
currently a number of land opportunities in Tonsley: space with small internal offices. In the south, 40
square metres.
Lot 220 Valiant Road; Lot 93 MAB Circuit; and Lot Donegal Road, Lonsdale is currently listed for sale
Another higher end investment opportunity is 333 MAB circuit are all currently listed for sale. The at $445,000 and features 420 square metres of
available at 126 Days Road, Ferryden Park. The allotments range between 4299 and 5634 square warehouse and office space, leased on a three plus
property is currently leased to Enerven Energy metres and offer valuable space in the growing three year term with an approximate 6.5% yield.
Infrastructure (a subsidiary of SA Power Networks) Tonsley innovation district.
Overall, there are still a number of opportunities
with a lease expiry of 31 January 2026 – the tenant
There are also some smaller-scale industrial in the industrial market for investors at either
has occupied the property since 2016. 126 Days
opportunities presenting themselves, particularly end of the scale. Many agents have reported that
Road has a current annual net rental of $281,139
in outer northern and outer southern areas. 18 industrial property is still highly sought after and
with a strong rent review structure of three per
Stephenson Street, Freeling presents a lower-end, the market remains competitive. With land, small
cent fixed increases per annum.
small-scale investment opportunity. The property scale warehousing and prime, long-WALE assets
all currently available, there are opportunities for
entry level investors and higher-end buyers.
Many agents have reported that industrial property is still highly Chris Winter
sought after and the market remains competitive. Commercial Director
12Western Australia
Month in Review
June 2021
Perth
As we approach the end of the 2021 financial year,
it has become clear that the industrial property
market in Western Australia has fared the best
of the three big asset classes in the wake of the
COVID-19 pandemic.
To date, leasing demand for modern, high-quality
fabrication, transport and logistics facilities over
the past six months has been firm with such
properties currently in limited supply.
Leasing demand for older style stock has remained
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subdued given the current oversupply, especially in
secondary industrial estates. Tenants will continue
to take advantage and reassess their space
requirements with a view to negotiating a lease
on favourable terms ahead of the next forecast
upswing in activity.
234567891915890815141535543 45845
Our enquiries suggest that present day building
compliance has rendered older facilities often that both the Tonkin Highway Industrial Estate in Prospective buyers appear to be focused on the
unfeasible to bring up to code or meet the current Bayswater and the Roe Highway Logistics Park in financial strength of the tenant, the length of
operational requirements of prospective occupants. Kenwick are virtually sold out. agreed lease terms, prospects for rental growth
Accordingly, such tenants are inclined to enter into and depreciation benefits.
From a purchase perspective, demand for industrial
design and construct agreements, often at inflated
property has slowly improved in the past six Traditionally low risk forms of investment (e.g.
rental rates negotiated on a formulaic basis as a
months. Demand has certainly strengthened for long-term deposits, bonds) are offering insufficient
percentage of total construction cost (i.e. economic
modern, securely leased investment property returns causing investors to re-direct capital
rents) as opposed to market fundamentals.
on the back of the prevailing low interest rate reserves to industrial property in a bid to secure
Arguably a ‘two tier’ market (design and construct environment leading to further yield compression. higher yields.
versus existing stock) has emerged.
The rise of e-commerce after the disruption to Interestingly, it appears as though limited regard
This represents one of the more immediate normal business operations caused by the COVID-19 is being paid by purchasers to the often-significant
opportunities for existing land-owners, especially pandemic has put the spotlight firmly on large scale variance between the passing rental and the
given the lack of supply of new land in the prime, warehousing, transport and logistics facilities. market rental for the accommodation achievable
core industrial estates. Our enquiries indicate under a standard leasing campaign where offered
13with vacant possession. The potential downside Month in Review
risk of significant rent reversions in the event of June 2021
tenant default is seemingly being disregarded in the
current low interest rate environment where yields
are continually being further compressed due to
the historically low cost of debt funding.
An opportunity may exist in a counter-cyclical
acquisition of older premises in a non-core precinct
at well below historical price levels, however the
key, as far as investors are concerned, is securing a
tenant. The achievable rental income, although well
below that for a prime industrial asset, may provide
a sufficient level of return against the capital
outlay, especially compared to yields being derived
from other asset classes of late. In the event that
the Perth industrial market continues to improve
in the near term, scope exists for improved returns
COMMERCIAL
at market rent reviews (either mid-term review or
lease renewal) as market rental levels increase from
the relatively low levels at which a number of older
style industrial properties have been leased in the
period from late 2019 through to mid-2020.
Alternatively, such premises may be viewed as a
short-term redevelopment option, particularly in
light of the lack of new industrial land available
within say a 15-kilometre radius of the Perth CBD.
Positively, the Western Australian economy
continues to go from strength to strength on the
back of successful containment of COVID-19 and a
strong mining and resources sector, which bodes
well for Perth’s industrial property market in 2021.
Greg Lamborn
Director
14Australian Capital Territory
Month in Review
June 2021
Canberra We see good opportunities in the industrial unit
The ACT industrial market has shown its resilience development market going forward with the limited
over the past year and this resilience has continued supply of modern single and dual bay industrial
while government economic incentives have begun units on the market and the strong uptake over the
rolling back. The low cost of finance has been a past 12 to 24 months.
strong driver for owner-occupiers while investors James Feeney
are attracted to the historically stable ACT market. Valuer
The sub $1.5 million industrial market continues to
be dominated by owner-occupiers. Prices for small
to medium size industrial units in the region have
been increasing as demand outstrips supply of
these units.
COMMERCIAL
There have been limited investment sales in the
region, however yields are tightening on good
quality properties with strong sublease covenants
and expiries.
23456789107733357550764 74 7
The low cost of finance has been a strong driver for owner-
occupiers while investors are attracted to the historically stable
ACT market.
15Property Market Indicators June 2021
Month in Review | June 2021
Capital City Property Market Indicators – Industrial
Factor Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin Canberra
Rental Vacancy Situation Shortage of Over-supply of Balanced market Balanced market Over-supply of Over-supply of Over-supply of Shortage of
available property available property available property available property available property available property
relative to demand relative to demand relative to demand relative to demand relative to demand relative to demand
Rental Vacancy Trend Steady Increasing Steady Steady Steady Steady Steady Tightening
Rental Rate Trend Increasing Stable Stable Stable Stable Stable Stable Increasing
Volume of Property Sales Increasing Steady Increasing Steady Declining Declining Steady Increasing
Stage of Property Cycle Rising market Start of recovery Approaching peak Rising market Start of recovery Rising market Approaching Rising market
of market bottom of market
Local Economic Situation Steady growth Contraction Flat Flat Steady growth Flat Steady growth Steady growth
Value Difference between Quality Properties Small Significant Significant Significant Large Significant Significant Small
with National Tenants, and Comparable
Properties with Local Tenants
Red entries indicate change from 3 months ago to a higher risk-rating Blue entries indicate change from 3 months ago to a lower risk-rating
6
Rental Vacancy Trend 6
Local Economic Situation Stage of Property Cycle
9
Increasing
5
Severe5
Peak of Market 8
Sharply Contraction Starting to
7
4 4
Decline
6
Increasing Contraction 5
Approaching
3 3
4
Steady2
Flat
2 Peak 3
1 1
Declining Market2
Tightening Steady Growth 1
0 0
Approaching
0
Bottom
1
1Month in Review | June 2021
East Coast & Country New South Wales Property Market Indicators – Industrial
Southern
Factor Canberra Central Coast Coffs Harbour Lismore Ballina/Byron Bay Newcastle Highlands S y d ne y
Rental Vacancy Situation Shortage of available Balanced market Shortage of available Shortage of Shortage of available Shortage of Balanced market Shortage of
property relative to property relative to available property property relative to available available
demand demand relative to demand demand property relative property relative
to demand to demand
Rental Vacancy Trend Tightening Steady Tightening Tightening Tightening Steady Tightening Steady
Rental Rate Trend Increasing Stable Increasing Stable Increasing Increasing Increasing Increasing
Volume of Property Sales Increasing Declining Steady Declining Steady Steady Increasing Increasing
Stage of Property Cycle Rising market Starting to decline Rising market Rising market Rising market Rising market Approaching Rising market
peak of market
Local Economic Situation Steady growth Flat Steady growth Steady growth Steady growth Steady growth Steady growth Steady growth
Value Difference between Small Significant Significant Significant Small Small Significant Small
Quality Properties with
National Tenants, and
Comparable Properties with
Local Tenants
Red entries indicate change from 3 months ago to a higher risk-rating Blue entries indicate change from 3 months ago to a lower risk-rating
6
Rental Vacancy Trend 6
Local Economic Situation 9
Stage of Property Cycle
Increasing Severe Approaching 8
Sharply
5
Contraction
5
Bttom 7
4 6
4
Rising Market
Increasing Contraction 3
5
3
Bottom of
4
Steady Flat
2 3
2
Market 2
Start of
1
1
1
Tightening Recovery 0
0
0
Tightening
SharplyMonth in Review | June 2021
Victorian and Tasmanian Property Market Indicators – Industrial
Factor Geelong Echuca Horsham Melbourne Mildura Hobart
Rental Vacancy Situation Over-supply of available property Balanced market Over-supply of available Over-supply of available Balanced market Over-supply of available
relative to demand property relative to property relative to property relative to demand
demand demand
Rental Vacancy Trend Increasing Steady Steady Increasing Steady Steady
Rental Rate Trend Stable Stable Stable Stable Stable Stable
Volume of Property Sales Steady Steady Steady Steady Steady Declining
Stage of Property Cycle Start of recovery Rising market Start of recovery Start of recovery Start of recovery Rising market
Local Economic Situation Flat Flat Flat Contraction Steady growth Flat
Value Difference between Quality Significant Small Significant Significant Small Significant
Properties with National Tenants,
and Comparable Properties with
Local Tenants
Red entries indicate change from 3 months ago to a higher risk-rating Blue entries indicate change from 3 months ago to a lower risk-rating
Rental Vacancy Trend 6
Local Economic Situation Stage of Property Cycle
6 9
Severe Peak of
Increasing 8
Contraction Market
5
Sharply
5
7
4
4
Starting to 6
Increasing Contraction
3
3
Decline 5
4
Flat Approachin
Steady 2
2
3
g Peak 2
Steady
1
Tightening
1
Declining 1
0 0
Market 0Month in Review | June 2021
Queensland Property Market Indicators – Industrial
Sunshine
Factor Townsville Mackay Rockhampton Gladstone Bundaberg Hervey Bay Brisbane Ipswich Cairns Gold Coast Toowoomba
Coast
Rental Vacancy Situation Balanced Balanced Balanced Balanced Shortage of Shortage of Shortage of Balanced Over-supply of Balanced Shortage of Over-supply of
market market market market available available available market available market available available
property property property property property property
relative to relative to relative to relative to relative to relative to
demand demand demand demand demand demand
Rental Vacancy Trend Steady Steady Steady Steady Tightening Tightening Tightening Steady Steady Tightening Tightening Steady
Rental Rate Trend Stable Stable Stable Stable Increasing Stable Increasing Stable Stable Stable Increasing Stable
Volume of Property Sales Increasing Steady Steady Steady Steady Steady Steady Increasing Steady Steady Increasing Steady
Stage of Property Cycle Start of Rising market Start of Start of Start of Start of Approaching Approaching Approaching Start of Peak of market Declining
recovery recovery recovery recovery recovery peak of peak of peak of market recovery market
market market
Local Economic Situation Steady Steady growth Steady growth Flat Steady growth Steady growth Steady growth Flat Flat Flat Steady growth Contraction
growth
Value Difference between Significant Significant Significant Significant Significant Significant Significant Significant Significant Small Small Large
Quality Properties with
National Tenants, and
Comparable Properties
with Local Tenants
Red entries indicate change from 3 months ago to a higher risk-rating Blue entries indicate change from 3 months ago to a lower risk-rating
Rental Vacancy Trend Local Economic Situation 9
Stage of Property Cycle
6
6
Severe
8
5
Contraction
5
Peak of Market 7
Increasing
Sharply 4
4
Starting to 6
Contraction Decline 5
3
Increasing
3
4
Approaching
2
Flat 2
3
Steady Peak 2
Steady Growth
1
1
Declining 1
Tightening 0
0
Market
0
ApproachingMonth in Review | June 2021
SA, NT and WA Property Market Indicators – Industrial
Factor Adelaide Alice Springs Darwin Perth South West WA
Rental Vacancy Situation Balanced market Over-supply of available Over-supply of available Over-supply of available Over-supply of available property
property relative to demand property relative to demand property relative to demand relative to demand
Rental Vacancy Trend Steady Steady Steady Steady Increasing
Rental Rate Trend Stable Stable Stable Stable Declining
Volume of Property Sales Steady Steady Steady Declining Steady
Stage of Property Cycle Rising market Approaching bottom of Approaching bottom of Start of recovery Approaching bottom of market
market market
Local Economic Situation Flat Flat Steady growth Steady growth Contraction
Value Difference between Quality Properties with National Significant Small Significant Large Large
Tenants, and Comparable Properties with Local Tenants
Red entries indicate change from 3 months ago to a higher risk-rating Blue entries indicate change from 3 months ago to a lower risk-rating
Rental Vacancy Trend Local Economic Situation Stage of Property Cycle
6
6 9
Peak of
Increasing Severe 8
Market
5
Contraction
5
Sharply 7
4
4
Starting to 6
Increasing Contraction Decline 5
3
3
Approaching 4
Steady Flat
Peak
2 3
2
Declining
2
Tightening 1
Steady Growth 1
Market
1
0 0
0
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