Industrial Market - December 2013 This is a guide to the industrial market conditions in the Australian Capital Territory, including nearby Queanbeyan across the border in New South Wales. With a population of some 350,000 is the seat of the Federal Government. The industrial estates service the city, but also the large hinterland of southern New South Wales. With around 60 industrial sales transactions a year, the industrial market benefits from the stability that comes from it being largely a public service city. State Final Demand Year to National ACT June 2010 2.8% 4.2% June 2011 2.3% 2.2% June 2012 3.7% 6.1% June 2013 2.6% 0.3% Last Quarter 0.6% 0.3% Australian Capital Territory Economy After a year of no economic growth in the ACT it posted a gain of +0.3% in the quarter to June 2013. The unemployment rate has remained steady, despite national increases. The ACT budget of June provided for continuing operational deficits and an increase in debt, though the ACT remains the least indebted of the states and territories, however the ACT government indicated that an economic slowdown was expected. State Final Demand was positive in the quarter and year to June 2013 at +0.3%, though it remains to be seen whether this will continue under the policies of the new federal government. population growth has been above the national average at +2.2% for the year to March 2013, though the rate of growth has slowed a little. This is one of the highest population growth rates in Australia, second only to Western Australia. The prospects for the ACT are influenced by political cycles, but at this stage it appears that the combination of secure public sector employment (despite marginal cutbacks) and real wage growth is supporting the economy. With the federal election now over and a coalition government installed, will be evaluating the impact on the local market. The prospects for the ACT are for continuing trend growth in 2013. Unemployment As at National ACT October 2011 5.1% 3.8% October 2012 5.4% 4.1% September 2013 5.7% 4.2% October 2013 5.7% 4.4% /Queanbeyan Industrial Market The main industrial estates are in Fyshwick, Hume, Mitchell and Queanbeyan. The industrial market continues to soften, primarily as a result of the oversupply of industrial land and uncertainty in the local economy after the recent change in the federal government, with the newly elected coalition government looking to reduce public service numbers. Downward pressure on rents and capital values continues, particularly for older stock in secondary locations. Mitchell is probably the exception to the broader market trends as land supply in this suburb is limited and it continues to grow off the back of servicing the continually growing residential area of Gungahlin. The industrial market has eased in the last half of 2013, reflecting a plentiful supply of industrial land and lower levels of confidence in the regional economy, following the recent change in the Federal government. Current conditions are an opportunity for any tenants looking to enter the market, with ample new stock available, allowing tenants to upgrade or expand their premises, and to seek an improved location with little or no increase in the rent being paid. PAGE 1
There is ample industrial space on the market for lease, including showrooms and bulky goods premises. For anyone looking to lease large freestanding warehouse space, there are limited options, but by the same token, there is limited enquiry in this sector of the market at present. /Queanbeyan Industrial Market Locations In contrast, there is a shortage of small basic warehouse or workshop premises, with a functional design, of up to 500 square metres in size. Mitchell in particular has a shortage of such smaller space, and much of the new development has been targeted at more upmarket or clean industries. Mitchell to the north. Fyshwick, to the east of the CBD, with direct access to the Monaro Highway. Hume to the south, also with direct access to the Monaro Highway. Queanbeyan, across the border in NSW but effectively servicing the ACT market. In the sales market, small investment stock (under $1 million) with a good tenant, reasonable lease profile and functional design is saleable at circa 8.00% - 8.5% net. The yield on larger investments tends to be 0.5% - 1% higher than the smaller stock due to the smaller buyer market. The main industrial estates of are to the north, east and south of the CBD, plus Queanbeyan across the NSW border to the east. As the majority of purchase demand is being led by owner occupiers, the highest demand is for: 1) New small basic strata units, 100-150 square metre, four doors and a roller shutter. 2) Freestanding premises of up to 500 square metre on land size of up to say 2,000 square metre. The majority of leasing demand is for: 1) Clean industrial premises from 100-150 square metre with a small showroom. 2) Traditional industrial units from 300-500 square metre, four walls, roller door and three phase power. PAGE 2
ACT/NSW Industrial Markets include the locations of Fyshwick, Hume, Queanbeyan, and Mitchell. Map courtesy of Google Maps PAGE 3
/Queanbeyan Sales Transactions /Queanbeyan Industrial Market Demand The value of property transacted each year has varied between $30 million and $50 million in past years. But three higher value sales in Hume in the current financial year has seen sales increase with $88 million in sales, for the 2012-2013 financial year. The number of transactions has increased during 2013 despite the slower leasing market and demand continues for prime property and strata units. In terms of the number of sales transactions below $10 million per sale, there are about 50 sales a year, well below the pre-gfc peak of 65 but sales numbers are rising. In the 2012-2013 financial year there were 68 sales, despite the slower leasing market, with most of the activity at the smaller end of the market. There is a ready market for strata units and smaller single properties that sell under $1 million, with typically around 25 sales a year being recorded in this price bracket. At the cheaper end of the market, sales cluster in the range of $300,000 and $900,000, while a healthy number of sales occur between $1 million and $2 million. Our survey has tracked some 50 of the latest sales and of the leasing listings on the market, which shows that it continues to be active. Older industrial buildings are selling for between $800 - $1,250 per square metre and newer industrial buildings are selling in the range of $1,500 - $2,000 per square metre. Good quality office and showroom space in the industrial suburbs may achieve prices in the range of $2,000 - $3,000 per square metre. Older industrial buildings are leasing for between $80 and $100 per square metre and newer industrial buildings in the range of $120 square metre (under 500 square metres) - $200 square metre (under 500 square metres). Good quality office and showroom space in the industrial suburbs may achieve between $200 -$300 per square metre. PAGE 4
/Queanbeyan Industrial Market for Sale /Queanbeyan Industrial Market for Lease Source: realcommercial.com.au Source: realcommercial.com.au Map below shows the location of properties for sale. Map courtesy of Google maps. Map below shows the location of properties for lease. Map courtesy of Google maps. PAGE 5
Recent sales by LJ Hooker Commercial Conclusion 12/27 Yallourn St, Fyshwick - $315,000 New 116 square metre two level strata office unit. Although there has been some consistent activity over the past 12 months, rental levels and capital values will continue to decline in the short term. With the new federal government in place, uncertainty is likely to remain until after the 2014 budget, delaying a rise in confidence levels until the second half of the year. 7A Barrow Place, Queanbeyan - $495,000 Older style 440 square metre colourbond shed on 1826 square metre land. 57 Kendall Avenue, Queanbeyan - $900,000 Good quality 450 square metre high clearance colourbond building on 3265 square metre land. 13/27 Yallourn Street, Fyshwick - $285,000 New 103 square metre two level strata office unit. Recent lettings by LJ Hooker Commercial Unit 7, 24 Iron Knob Street, Fyshwick - $38,720 pa New first floor office suite of 110 square metre Unit 2, 5-7 Felton St, Mitchell - $20,268 pa Brick workshop/storage unit of 172 square metre Activity levels have remained at a consistent level over the last year, even though in the short term demand levels have eased. With the new federal government in place, any uncertainty over policies is likely to be dispelled in coming months, leading to improved levels of certainty and confidence in the market. There is a plentiful supply of industrial land which is available for prospective tenants or owner occupiers, and this provides an opportunity for buyers and lessees to move into the new construction market which is offering good value by comparison with existing stock. As the supply of industrial land gets taken up, this will change in the future, but for now it offers an interesting opportunity. 27 Albany St, Fyshwick - $130,000 pa 700 square metre air conditioned showroom in good corner location leased to national tenant. Shop 9, 17 Iron Knob St, Fyshwick - $102,400 pa 320 square metre air conditioned showroom leased to national 24 hour gym operator. 8 Raws Crescent, Hume - $71,200 pa 685 square metre warehouse with air conditioned office leased to national tenant. www. This report has been prepared with the assistance of data and analysis from Propell National Valuers and other sources. www.propell.com.au This information is provided in good faith and on the assumption that data sources are accurate. It is general information only and not a comprehensive analysis and should not be relied on as such. Any reproduction of the contents should acknowledge LJH Commercial and Propell National Valuers as the source. Neither LJH Commercial, Propell National Valuers nor any person involved in the production of this report accepts any liability for its contents. Forecasts and commentary are based on a set of assumptions which may change.