Considering an investment in industrial property?

BY GARETH KENT

Director, Preston Rowe Paterson

Over the past three years, we have changed the way we live, work, play and more importantly shop.

Australia is the eleventh largest e-Commerce economy worldwide with an increase of 15 per cent throughout 2021.

The biggest player in Australia is Woolworths that had revenue of $4 billion, followed by Coles $2.3 billion and Apple $1.2 billion.

As with all property, when we fundamentally change how we do things, it impacts markets differently. The sector that provides the logistics for e-Commerce is termed “Industrial” and this is currently the fastest growing property market in the country.

The industrial property sector over the past six months has broken all records and experienced some of the fastest growth rates on record.

Within the Geelong and coastal region, this market is comprised of three subset groups: large industrial parcels of land, mostly found in the GREP (Geelong Ring Road Employment Precinct); established large industrial sheds located in older industrial precincts such as North Geelong, Breakwater and Moolap; and lastly the modern concrete panel factories and warehouses that are being constructed at a rate of knots in South Geelong, North Geelong, Torquay and Breakwater.

The Geelong Ring Road Employment Precinct is located north of the Geelong Ring Road and between Corio and Lara. It has experienced unprecedented growth. In 2018, the average value rate for a 1–5 hectare parcel was $65/sqm.

In 2022, the same properties are trading for $300/sqm and for a large parcel of ten hectares $200/sqm. That is a growth rate of 300-400 per cent in less than five years! One parcel that was purchased for $15.8 million last year recently sold above $25 million!

There is currently 4,599 hectares of current and future industrial zoned land in the Greater Geelong region and 12 separate industrial precincts. The GREP is comprised of industrial 1 and 2 zoned parcels with restrictions on subdivision, 52 per cent is still undeveloped.

The established older properties in North Geelong, Breakwater and other traditional industrial areas are seeing many of the older sheds being converted to logistics or similar uses and have also achieved unprecedented growth.

Number 122 Victoria Street, Geelong, sold on November 11 for $3.7million. That’s nearly $1000/sqm! A similar site also in Victoria Street sold for a record $550/sqm in 2020 – that’s nearly 100 per cent growth in 2 years.

Also last week, 73-77 Tucker Street, Breakwater, sold for a record $4 million for a two-acre infill industrial parcel, at nearly $1,000/sqm.

The smaller concrete tilt panel type properties are being constructed at a record rate. In 2018, the average sale price for a tilt panel warehouse of 100-200 sqm was $2,245/sqm. In 2022, the same sized warehouse is selling for $3,471/sqm on average.

As more stock is added to this market, it continues to perform well above any other property class. Overwhelmingly the purchasers of these smaller sheds appear to be owner-occupiers. Small businesses servicing this behemoth e-Commerce sector, along with existing operators buying their own premises.

When the Industrial market will slowdown is anybody’s guess? But it is very interesting to see such a strong performance from one part of the sector, whilst other property markets are clearly slowing.

This sector is definitely worthy of consideration if you are looking to invest in the commercial property market!

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