Industrial Property Is Clearly Holding Its Own

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Industrial Rentals set to rise, and Selling Yields will begin to firm.Vacancy rates for Industrial property have fallen dramatically over the past year — declining by 39% on average, across the country.

This is mainly the result of strong demand for warehousing, following the high Australian dollar.

Plus, there has only been a modest amount of new construction. And that means you should see rentals improve and selling yields start to firm.

For Individual Cities

The Brisbane market has seen a significant boost, with a 45% fall in its vacancy level over the past 12 months. For investors, the main focus has been upon modern, purpose-built properties leased to least to quality tenants on long leases.

Whereas in Melbourne, there has been a 57% drop in vacancies for Prime-grade Industrial space. And many tenants have been forced into leasing second-grade accommodation. This will no doubt lead to higher rentals and more speculative development during the 2nd half of the year, as tenant demand picks up even further.

For Sydney, the lack of Prime-grade space has encouraged a spate of speculative development — of which, about 80% has been leased before completion. The availability of space is expected to tighten, and selling yields firm.

The shortage of space in Adelaide has even led to the redevelopment of older sites; and the upgrading of secondary buildings. Therefore, the outlook for Adelaide is positive — with some good growth, as yields start to firm.

Despite the mining boom, Industrial activity for Perth has been somewhat sluggish — although rentals should remain stable, due to a lack of new construction. Furthermore, Perth is suffering from an inadequate level of infrastructure, currently affecting both business and the general public.

Bottom Line: If you While Retail property is the Commercial sector most affected by interest rates … Industrial property runs a close second.

Therefore, any reduction by the RBA next month will be good news for investors looking to add Industrial property to their portfolio.

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