Industrial land soars in value amid limited supply
Industrial land in Australia is soaring in value. Experts are noting record increases in land cost in the eastern part of the country, particularly in Bayswater. Here, prices have reached historic highs.
On Tonkin Highway in Bayswater, a 14,784-square-metre industrial site sold for over US$8 million. Raine & Horne Commercial said that’s a record for a site of this size and location. A local developer has purchased the site. He plans to renovate the existing facilities and build two industrial warehouses. This is the third time the site has been resold, and it is due for a major upgrade.
The deal and its record value demonstrate the strong outlook for the industrial property sector in eastern Australia. Investors’ willingness to commit large sums indicates confidence in the sector’s growth. Analysts have also noted an increase in activity in the sector. The 2023-2024 sales survey indicates a 20% increase in prices.
One factor contributing to the increase in value is the limited supply. Estate agents are actively looking for industrial sites between 1,500 and 10,000 square metres.
Review of the situation with industrial land in other regions
It is worth noting that the scarcity of land resources is not unique to this region. South Australia also recorded a similar situation that affects the region’s development. The state and its capital, Adelaide, face serious industrial growth constraints. The main ones identified by experts are:
– slow pace of construction of electricity supply systems;
– delays in building sewerage and water infrastructure on new land;
– limited zoning of industrial land.
All of this affects the region’s development and limits the property market.
According to JLL’s analysis, only 10% of vacant industrial land is available for development. This amounts to 146 out of 1,500 hectares, which is extremely small for the industry. Experts predict that the number of available plots could shrink to a minimum within the next two years. This situation is driving up the price of industrial land. What started as a local problem is now systemic in the country. The result is a shortage of jobs and a decline in the flow of investment. Current figures and forecasts prove this:
1. Land prices in Adelaide have risen by 300% in three years.
2. Land values could reach South Sydney levels by 2026 if the price growth rate continues.
3. Developers’ options will be severely constrained, affecting industrial development.
4. Tenants will find it unviable to operate.
At the same time, demand for land continues to grow, driven by the need for warehouse space. From 2020 to 2023, around 60 hectares were sold each year, and the figure is rising.