Sales activity in Adelaide’s industrial market has picked up markedly, with yields stabilising, according to the latest research from Knight Frank.

Knight Frank’s Australian Industrial Review Q2 2024 found the market was more active during Q2 this year for assets above $5 million, with 15 properties sold for a total of $263.7 million, bringing the total for the first half of 2024 to $357 million. 

This marks a significant improvement over Q1 sales, in which only nine transactions were recorded for a value of $93.3 million. 
 

Knight Frank Partner, Head of Investment Sales in Adelaide Chet Al said the market was still active, with several investors looking for opportunities. 

“Whilst not settling during Q2, a significant recent transaction of note which exemplifies the ongoing activity in the market is the sale of the ex-Coca Cola site in Thebarton, negotiated by Knight Frank. 

“The fully-leased property, comprising a total site area of 21,448sq m with 13,100sq m of industrial space, settled in July 2024 for $23.625 million for a market yield of 6.1%.

“The asset was purchased by a local private group with multiple underbidders to support pricing, demonstrating there is still depth in the investor market. 

“We expect market activity to continue for the remainder of this year, in which case we would have sales volumes at least comparable to the last three years, if not better.

The continued interest in the market has been highlighted by yields, which have now stabilised at 6.3% for prime and 7.16% for secondary property, unchanged for a year.

Vacancy continues upward trend despite increased take up

In Adelaide’s industrial rental market, vacancy rates continued to rise despite increased take up.

Over Q2 Adelaide’s industrial vacancy rate was up by 22% to 306,000sq m. However, this vacancy figure includes approximately 50,552 sqm of speculative space under construction and not currently available to occupy.

Accompanying this surge in supply, there has been a steady increase in leasing activity, with take-up growing each quarter, and 20,619sq m recorded in Q2.

Knight Frank Partner, Research and Consulting Dr Tony McGough said despite the rise in vacancy, industrial rents in Adelaide had risen slowly in Q2.

Prime net face rents increased by 3.7% and secondary net face rents rose by 4.3%.

“Economic rents have continued to increase on the back of persistent growth in construction costs and the rise in the cost of capital,” he said.

“While rents are continuing to climb, the rate at which this is occurring has slowed from previous periods.”

The Knight Frank report found there was ongoing development activity in Adelaide’s industrial market.

As of Q2, future development supply is projected to total 214,230sq m over the next three years, marking a 14.2% increase from the pipeline a quarter ago. 

The focus for future industrial development is Adelaide’s northern precincts, which account for 81% of proposed new space.

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