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Australia’s industrial property sector remains a top-performing asset class, with strong demand driven by e-commerce and logistics growth. However, certain challenges, including high interest rates and construction costs, may impact the supply of new industrial properties in the coming years.
E-commerce Boom: The pandemic-accelerated shift to online shopping has significantly increased the demand for warehouse space, especially in urban centers like Sydney, Melbourne, and Brisbane. Industrial facilities close to city centers are highly valued for their proximity to transport hubs and consumers.
Limited Supply and High Demand: With limited new land supply, especially in Melbourne’s southeast and Brisbane’s Trade Coast, industrial rents are expected to grow. Entry-level industrial assets that offer redevelopment potential continue to attract high-net-worth investors and developers.
Shift in Demand for Smaller Facilities: Notably, in 2024, there has been a shift towards smaller industrial facilities (3,000 to 10,000 square meters) rather than larger spaces, as businesses prioritize affordability and operational efficiency.
The residential property market reflects growing concerns over affordability as rising costs impact buyer behavior. Nonetheless, vacant land in suburban areas remains attractive to buyers looking to build custom homes at lower entry costs than established homes in central areas.
Vacant Land Demand: Rising construction costs have led some buyers to consider vacant lots as a more affordable way to build custom homes suited to their specific needs. Demand is particularly strong in outer suburbs, where land costs are generally lower than in urban centers.
Suburban Developments: The residential market has been impacted by inflationary pressures, interest rate hikes, and economic uncertainties, which have made some buyers cautious. Despite these challenges, suburban developments in major cities, offering smaller, more affordable lots, remain in demand.
Investors Exercise Caution: Due to rising construction costs and slower capital growth, investors are increasingly cautious, especially in higher-priced markets like Sydney and Melbourne.
Industrial Market: Sydney’s industrial property market is robust, with limited supply and high demand pushing up prices. Entry-level industrial assets, often under 150 square meters, attract owner-occupiers looking for affordable investments. Sydney’s western precincts, where prices are more accessible, see particularly high demand.
Residential Market: In Sydney’s growth corridors (southwest and northwest), affordable vacant land remains a strong draw. Suburbs such as Box Hill, Marsden Park, and North Richmond are popular for new land purchases, while the Upper North Shore sees demand for redevelopment properties, as buyers seek modern homes without the constraints of heritage overlays.
Industrial Sector: Melbourne’s industrial sector continues to experience strong demand, especially in major industrial parks like Fusion Business Park and Southeast Business Park. However, high construction costs have led to a decline in new builds, which may limit supply in the coming years. Smaller warehouses designed for automation and sustainability attract businesses that prioritize efficiency and modern amenities.
Residential Market: Melbourne’s suburbs offer relatively affordable entry points, and master-planned communities in growth areas are especially popular among first-home buyers. These communities provide comprehensive amenities, such as retail spaces, schools, and green areas, which enhance their appeal.
Industrial Market: Queensland’s industrial market is driven by investor demand, particularly in Brisbane and the Sunshine Coast. Entry-level assets in Brisbane are increasingly hard to find, with strong competition from owner-occupiers. The Trade Coast area and inner northern suburbs see high interest due to their accessibility and proximity to transport routes.
Residential Sector: Growth corridors in Queensland’s southeast, including suburbs like North Richmond and Gregory Hills, continue to attract buyers seeking affordable land options. As development expands, these regions offer accessible housing choices for families and first-home buyers.
Industrial Sector: WA’s industrial market remains competitive, particularly in secondary industrial precincts. Small-scale industrial properties, like warehouse units, are popular among small business owners and hobbyists seeking affordable space for storage or operations. Suburbs such as Wangara and Malaga in northern Perth offer a variety of options, and developments in new estates like Tonkin Highway Industrial Estate cater to ongoing demand.
Residential Market: In Perth, high affordability draws buyers to suburban areas where vacant land offers a viable entry point. As in other regions, vacant land developments are popular among families seeking lower-cost options to build custom homes.
The September 2024 report underscores the resilience of Australia’s property market, particularly in the industrial sector, which remains in high demand despite economic challenges. Residential markets, meanwhile, face affordability pressures, with outer suburban and regional developments emerging as the most feasible options for buyers looking to build new homes. Investors are proceeding cautiously as construction costs continue to rise, impacting potential returns in both residential and commercial sectors.
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