Industrial property, one of the three main classes of commercial property, is characterised by longer-term tenants. These tenants are usually large companies that have specific needs that include good access for large vehicles, high ceiling and gantry heights, proximity to major transport links, and a flexible mix of office and warehouse space.

The companies that rent warehouse-type space tend to make excellent tenants. Mostly they’re signed up on long-term lease agreements with fixed rental increases, which offer investors and owners a more secure and stable income base. Often, tenants in warehouse-style industrial are on net leases that enable owners to pass on some or all costs of land tax, council rates, water rates, insurance, management fees, and maintenance.

According to a 2021 report for Australia from a major international commercial real estate agency, industrial rents are set to soar, particularly for warehouse-type properties. In a February 2022 article in The Australian Financial Review  it was noted the national industrial vacancy rate has dropped to close to 1 per cent across Australia and rents tipped to rise by 50 per cent over the next five years.

Supply chain disruptions, and acceleration in ‘just-in-time’ or, more likely, ‘just-in-case’ stockpiling, and online retailing are the largest drivers of demand. Since 2020, the rise of online purchases has been stratospheric, with 82 per cent of households shopping online and the percentage of retail sales online over 13 per cent in late 2021. When the reopening of physical shops has caused a tapering of this figure, many households discovered the convenience (and necessity) of shopping online. When Officeworks stores are closed, and the online store no longer stocks your favourite products, you make the switch to Winc, a wholly online retailer of office supplies. And this type of switch is occurring across categories.

Of the states, Western Australia and South Australia have experienced the fastest rises in rents, with capital cities leading the charge. Perth was up 14.6 per cent while Adelaide saw an effective rental increase of 13 per cent.

As rents become unaffordable in capital cities and industrial property scarcer, we expect to see a move to regional areas such as Mount Gambier. Any moves are expected to increase demand for industrial property in the southeast of South Australia where supply is fixed, with no new industrial property under construction.

Why invest in Mount Gambier industrial?

As investors move to diversify their property portfolios, the industrial sector, with robust demand and low supply, offers a compelling investment opportunity.

The demand for warehouse and logistics space is expected to continue to rise, especially as government-driven infrastructure projects drive up demand including in regional locations.

Strong growth in South Australia’s economy, with net migration for the first time in over 30 years, has turbocharged demand. Adelaide industrial is almost fully leased, meaning companies will look to booming regional areas such as the Limestone Coast and Mount Gambier to buy or lease industrial property.

Compared with other commercial or residential property, industrial property offers competitive yields and long-term growth prospects. Combine this with our low interest rates, strong investor appetite, and industrial rents tipped to rise by 50 per cent over the next five years and you have a recipe for success.

Can we help with your Mount Gambier commercial property?

Call Herbert Commercial on 08 87 250 500 for a complimentary annual investment portfolio assessment. From this assessment, feedback may warrant the need to seek Herbert Commercial’s advice and expertise with formulating a plan to action restructuring or renegotiating the best lease scenario moving forward. We’re here to help.

As the only dedicated commercial property agency in Mount Gambier, we have a network with and are sought after by national commercial agencies as a trusted extension to their services. Our wealth of commercial knowledge of the Mount Gambier market extends to the broader commercial market, meaning we can ensure you achieve your commercial property goals.