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Australian industrial property in hot demand amidst changing conditions

Colliers International releases new Industrial Research & Forecast Report

Investor demand in the Australian industrial sector remains buoyant and diverse on the back of strong market fundamentals and significant infrastructure investment across the country.

According to Colliers International’s latest Industrial Research & Forecast Report, the strong flow of capital into the Australian industrial sector now stems from a diverse range of investor types including local privates, property syndicates, institutional investors and offshore buyers. 

“Against the backdrop of the strong fundamentals in the industrial property market, investor demand has remained particularly buoyant,” Malcom Tyson, Colliers International Managing Director of Industrial, said. 

“This strong demand, however, is being restrained by the lack of stock being available, particularly the lack of portfolio opportunities. As a result, yields have continued to compress across the board over the past 12 months. 

“We expect to see the polarisation of yields between capital cities to be more prominent with the East Coast markets of Sydney, Melbourne and Brisbane seeing stronger capital appreciation than Perth and Adelaide.”

Mr Tyson said continued demand for industrial space was further supported by a massive investment program in infrastructure across the country. Public infrastructure spending has increased by 4.6% over the year to June 2018.

“More importantly, investment in transportation projects has surged substantially over the past few years and expected to accelerate over the next five years with the amount of work to be done remains enormous,” he said. 

“Improvements in infrastructure are expected to have tremendous spillover benefits to the industrial property sector both directly through improved transport efficiency and productivity for industrial tenants and indirectly through elevated demand from a broader base of  business services as well as valuation uplifts for industrial land surrounding the upgraded networks.”

Monica Velez, Colliers International National Director of Logistics & Supply Chain, said supply chain optimisation had become a critical competitive advantage for many industrial users and operators.
as the Australian economy continued to navigate though a “triple low environment” of low growth, low
interest rates and low inflation.

“Australian businesses are increasingly focusing on improving their operational efficiency to improve the bottom line,” Ms Velez said. “The most common scenarios that trigger a company to re-assess their network model are Mergers and Acquisitions, restructuring to shift focus onto a business unit or product brand, entering into a new market, diversification or pure realisation.

“The positive effects of investing in the consolidation or reduction of nodes in a supply chain, often result in a significant decline in operating costs, sometimes ranging from 10 to 30 per cent of the impacted budget.”

“Storage costs efficiencies are found in property costs when the consolidated warehouses are designed to better utilise the ‘site air’ by considering alternative storage solutions and pallet handling systems that achieve greater per square meter or cubic density.

“As a consequence of soaring land values, land taxes – which will be passed to occupiers as outgoings – are expected to rise substantially over the coming years. The average industrial land value across Sydney has increased by 17.5% over the past year with some regions rising by more than 50%. 

“Rising transport costs are another key concern for industrial operators in Australia. Warehouse consolidations can lead to the reduction of distribution or transport costs, which can account for almost half of the overall cost.”

Mr Tyson said a recurring theme across the globe and in Australia was the speed of advancement in technology and how the ‘4.0 Industrial Revolution’ was not only shifting the paradigms in the industrial market but also creating tremendous opportunities for occupiers, owners and investors alike. 

“For industrial users, emerging technologies in automation, robotics, autonomous vehicles, big data and artificial intelligence are helping businesses to scale up more quickly and maintain competitive advantages through more efficient distribution networks and strategic space planning, which in turn minimise labour efficiency drains and optimise productivity,” he said.

“These new technologies are being enabled by the emergence of the next generation of technologically advanced industrial developments that incorporate innovative designs and high-tech offerings.

“Advances in building and construction technologies are also benefiting property owners in multiple ways. Industrial buildings can be constructed quicker and cheaper, which is offsetting against the rising land costs. 

“Requirements are no longer confined to traditional “blue-collar” manufacturing industries, but have become highly diversified and include e-Commerce, data centres, food and beverage retailers, dark kitchens, construction companies, furniture showrooms, health care facilities, science and
technological services and hi-tech logistics and fleet management.

“In fact, many of the biggest occupiers of industrial space today have only been in existence after the last GFC, highlighting the extraordinary speed of disruption that is occurring and exciting times ahead for the industry.”

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Malcom Tyson

Chief Executive Officer | Australia

Corporate Executive

Sydney CBD

Malcom is the Chief Executive Officer for Colliers in Australia, delivering on our business plan and driving our enterprising culture. Our company is underpinned by a clear set of values, designed to maximise the potential of property to accelerate the success of our clients and our people.  

Over his 27-year career with Colliers, Malcom has had the opportunity to build and grow a number of successful teams. Prior to his current role, he led the NSW business along with the national Industrial business for 15 years. In 2005, Malcom joined the National Executive where the leadership group has steered our business to achieve incredible growth and reinforced our market-leading culture. Our business stability and continuity continue to attract market leaders, empowering them to think and act differently to drive exceptional results.  

Colliers has an enterprising culture which underpins our strategy for success. The business has won multiple accolades as a Best Employer and best in class in many service arenas. We appreciate the loyalty of our people and our clients and we thrive on collaborating to create enterprising solutions that exceed expectations. 

Within Australia, Malcom has had the benefit of working with a highly regarded leadership team, including John Marasco and Simon Hunt, who are focussed on maximising the potential of property for our clients, through delivering enterprising solutions as we work through the market conditions of 2021. By keeping aligned to our values of being enterprising to exceed expectations and collaborating to drive exceptional results, Colliers are well positioned in 2021 to maximise the potential of property and to be a part of leading our industry into the future, not only in Australia but right across the Asia Pacific region. 

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Laura Phillips

Associate Director | PR & Communications

Corporate Marketing & Communications

Melbourne CBD

Part of the Australian media landscape for 10 years, with a background in newspaper and magazine journalism, including property reporting. 

Fostering strong relationships with property and business journalists and editors across national, state and local media, from newspapers and online publications to television and radio.

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