Industry boom provides springboard for growth in SA property markets
Continued momentum in South Australia’s defence, medical, engineering and resources industries is helping power the state’s economy to its strongest position in years and provide a springboard for growth in major property markets.
26 Jun 2018
That was one of the key outtakes at CBRE’s South Australian Market Outlook event in Adelaide, which highlighted the favourable conditions that are aligning to underpin economic growth and improvement in the state’s office, industrial & logistics and retail property markets.
CBRE’s Australian Head of Research Bradley Speers said South Australia offered favourable long term growth prospects, underpinned by its diverse and stable economy.
“Over the past 10 years, South Australia has remained a low growth, low volatility market that hasn’t experienced the same cyclical highs that the resource driven states of Western Australia and Queensland have,” Mr Speers said.
“The point of difference from that low volatility has been the industrial sector, which experienced a significant downturn following the closure of car manufacturing in the state. However, with a strong pipeline of infrastructure and major engineering projects in the defence, mining, utilities and medical industries, there is now a more solid basis for long term growth that paints a positive picture for the future. Additionally, the outlook for housing construction in Adelaide is more optimistic than most other Australian capital cities.”
CBRE’s Senior Director, Industrial & Logistics, David Reid said growing momentum in the state’s defence industry had helped the South Australian economy turn the corner and re-instill confidence following the closure of car manufacturing in 2017.
“With defence expected to create around 8,000 new jobs in our state over the next 30 years, this growing industry is providing a terrific platform for growth and opportunity. A pipeline of projects over this period, including ship and submarine building, is seeing land take-up in the industrial & logistics market reach unprecedented levels as developers look to even the current imbalance between supply and demand,” Mr Reid said.
Mr Reid said technology would also be a catalyst for major transformation in the state’s industrial & logistics market, driving new ‘cluster-style’ developments in emerging precincts.
“South Australia is on track to become the engine room for medical technology, with this growing industry driving clustered development in areas such as Tonsley and the precinct surrounding Royal Adelaide Hospital.”
CBRE Senior Director, Advisory & Transaction Services – Office Leasing, Michael Pfitzner, said the defence and medical industries were also having a ripple effect on the office market, driving demand with strong levels of interest for accommodation now and for the immediate future.
“Historically, there hasn’t been a defence presence in the CBD and fringe markets, however, for the first time, we’re now seeing strong enquiry come through from this growing industry – with expectations this will continue over the long term,” Mr Pftizner said.
“Existing groups are looking to increase their space by about 50% in the CBD and fringe, with a significant amount of this demand for co-working and flexible spaces that enable them to cater for contracts and tender processes. In particular, we’re seeing a lot of international groups dip their toes into co-working.”
CBRE’s Director of Capital Markets Ian Thomas said growing confidence in Adelaide’s office market was providing a strong platform for investment, positioning the state as a sought-after destination for both domestic and offshore capital.
“Over the past few years, the majority of investment involving larger assets in the Adelaide office market was Singaporean, with a notable gap in the market from domestic investors. Today however, that gap is being filled, with more eastern seaboard groups active in the market than ever. The offshore interest is still there, but Australian investors now recognise Adelaide as a key location for capital investment,” Mr Thomas said.
CBRE’s Director of Large Format Retail Dallas Sears said strengthening confidence in the state’s key growth industries was helping boost discretionary retail spending.
“Retail doesn’t rely on one sector doing well, it relies on consumer confidence and that’s what we’re seeing gain momentum in South Australia,” Mr Sears said.
“The biggest areas of retail growth in South Australia are around discretionary spending – food & beverage, and outdoor recreation. South Australians in fact spend more on food & beverage than their eastern seaboard counterparts. For shopping centres in particular there needs to be a strong focus on providing quality offerings that cater to this demand.”
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at https://www.cbre.com.