Asset type and economic rents are driving pricing for niche users in the Industrial Market

Australia – Around Australia there is significant divergence in industrial rents between cities and precincts as vacancy becomes more concentrated in emerging areas with high development.

But there are also specialised rents for specialised tenants, with one example being the cold storage and ready-to-eat food industry.

Cold storage

This niche industry has been going through a rejuvenation of facilities over the past 18 months to two years. Ageing facilities lack the energy efficiency, green ratings and upgraded panels that major corporate tenants seek to align with wider corporate objectives.

The associated uplift in newly built, speculative and retro-fitted cold storage facilities has struggled to keep up with demand, in contrast with the wider market. Rental uplift has been uniform across the markets, with the underlying cost to construct the facility the greater influence on rental price, in contrast to location. Rents of $350/sqm+ net are no longer considered unusual.

Industrial outdoor storage

Hardstand (or Industrial Outdoor Storage) will continue to mature in product offering and as a structured and focussed investment class. Sites earmarked for now deferred development proposals are increasingly repurposed for a five- or ten-year horizon for secure and fenced high load rated container storage or bitumen and hail netted facilities for vehicle storage.

Due to a lack of options tenants seeking power, internet and other improvements to the site will pay the economic rent to deliver these services.

Onshoring of essential materials

Greater focus on the onshoring of essential materials and manufacturing will continue to drive the market through 2026 and beyond.

What began as post-COVID ambition to secure essential pharmaceuticals and material inputs has since been spurred into more concrete action. Initially this was due to the Trump-induced tariff trade uncertainty and Federal Government incentives such as the $15 billion National Reconstruction Fund. In recent weeks this has further been highlighted as a critical need as the interruptions to oil exports from the Middle East has further exposed Australia’s limited production and storage capacity across all fuel and agricultural products.

The major commercial targets, and likely success, will be limited to industries such as advanced manufacturing, green energy, and critical technology, where Australia’s high-cost and highly-skilled workforce is a benefit and not a hindrance such as defence, meditech, envirotech and other life sciences. Federal Government intervention and support for other critical inputs to the economy will also emerge in the short term, but have longer term impacts on the way Australia produces and stores such critical resources.

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For further information, please contact:

Vanessa De Groot – Marketing & Communications, Knight Frank

Vanessa.degroot@au.knightfrank.com +61 410 460211

Notes to Editors

Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, the Knight Frank network has 600+ offices across more than 50 territories and more than 20,000 people. The Group advises clients ranging from individual owners and buyers to major developers, investors, and corporate tenants. For further information about the Firm, please visit www.knightfrank.com.