_Adelaide’s industrial market sees strong growth in land values and rents

The firm’s Australian Industrial Review Q4 2024 found Adelaide had the highest industrial rental growth of the capital cities in Australia, with prime rents rising by 12.1% over the year. Brisbane was next (7.2%), followed by Melbourne (6.7%), Perth (6.1%) and Sydney (3.9%).

Secondary rents in Adelaide are rising at an even faster pace than prime, increasing by 13.8% over 2024 compared to Brisbane (7.2%), Melbourne (6.7%), Perth (6.1%) and Sydney (3.9%).

There is a narrowing gap between prime ($142/sq m) and secondary rents ($105/sq m) in Adelaide’s industrial market, which is likely a result of heightened demand coupled with limited forthcoming supply.

Price-sensitive tenants, or those constrained by specific location requirements, are increasingly willing to occupy lower-quality space, thus driving up secondary rents.

While greater divergence in vacancy rates and rental performance has been seen around Australia’s industrial markets due to differing supply levels resulting from record development completions, Adelaide’s market has remained more consistent rather than being location specific, with every industrial precinct seeing annual prime rental growth over 10%.

The research also found that industrial land values continue to show strong growth in Adelaide across both small (less than 5,000sq m) and medium-sized (1-5ha) lots, with a rise of 17.6% and 16.7% respectively, amid high demand.

The Inner West remains Adelaide’s most expensive precinct for both land values and rents due to its proximity to the CBD and access to key transport hubs.

However, the Outer North has dominated take up, making up nearly 70% of take up over the second half of 2024.

No leases over 5,000sq m were recorded in the Inner South and Outer South over H2 2024 – these precincts are less built out and stock is mostly made up of smaller warehouses.

Supply in Adelaide’s industrial market remains stable, evidenced by modest vacancy levels and a strong development pipeline.

As of the end of Q4 2024, 302,736sq m of warehousing is available for lease, with 214,000sq m of supply expected to be delivered over the next three years.

However, as in other markets, present uncertainty about demand and high construction costs mean that developers are increasingly waiting on pre-commits before the commencement of developments.

Investment volumes fall

Industrial investment volumes in Adelaide totalled $433m in 2024, down 16% from 2023, but the number of sales only dropped by 1 from 2023 to 2024 from 27 to 26.
Much like most Australian cities, expectations are that industrial sales are expected to pick-up in Adelaide over 2025 with lower interest rates and an improving economy expected to drive this expected growth in investment, though present global uncertainty has yet to roll out into the market and a temporary pause may yet occur.

The bulk of the sales over 2024 were transacted in Adelaide’s Inner Northern suburbs of Kilburn, Wingfield and Regency Park with the other investments scattered around the city.

One significant industrial sales transacted in the Inner West at 26-36 Stirling Street, Thebarton. This property has 20 tenants and was sold in December 2024 for $22.0m at a core market yield of 6.69%. The site is located within 5-minutes of the CBD and has a total gross lettable area of 10,714 sqm.

Prime and secondary yields in Adelaide have started to tighten following a softening from Q2022 to Q2-2024.

Prime yields currently sit at 6.28%, reflecting a 3 bps fall q/q and 5 bps y/y. Meanwhile, secondary yields have decreased to 7.03%, down by 10 bps q/q and 13 basis points y/y.

Favourable expectations around interest rates and robust demand have contributed to this shift in yield direction. However, present market uncertainty may delay further advances in the short term.

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