The Big Squeeze on Industrial

The Big Squeeze on Industrial

Unbeknown to most, including the majority of tenants, a perfect storm has been building in the industrial leasing market. This has led to what has now become somewhat of a crisis: an acute shortage of medium to larger industrial premises in the Illawarra.

There have been numerous contributing factors:

  • An Australian wide strengthening of the industrial market

  • Extremely low industrial vacancy to Greater Sydney

  • ‘Out of town’ business being forced to seek alternate locations such as the Illawarra to operate from

  • The proliferation of ‘cookie cutter’ style small industrial unit developments in the Illawarra in recent years that have eaten up some of the available larger land parcels

  • Solid economic conditions prevailing for the majority of industrial sub-sectors such as: construction; BlueScope Steel and related contractors; the resources sector; transport and logistics; and e-commerce/warehousing

  • The lack of new larger buildings being constructed due in part to substantial cost increases

  • Tenants being unaware of the tightening market and therefore being complacent

MMJ are aware of numerous local businesses that, right now, face huge challenges in finding new premises.  This is a situation we have not seen before, certainly not in the last 20 years, and may actually cause a number of well established business to face the grim reality of being left with no premises to operate their business from, and therefore potential closure.

One example we are aware of is where a landlord has advised he will take back possession of premises for his own expanding business, forcing out a long term tenant and well known business of 50 staff. Another landlord is looking to redevelop part of a large industrial site for a new main road service station development forcing two medium sized business into the unknown. More and more such cases are emerging. Some are completely beyond the tenant’s control, and some however are not. The complacency of some sitting tenants in not renewing expired leases, or not being diligent in paying rent, is resulting in potential peril.

Even more than increasing rental rates, Industrial land values have risen dramatically in recent times. So too, finance costs have been rising and construction costs have ballooned as a hangover from COVID. All in all, despite strengthening demand, the feasibility of building new premises is not necessarily straight forward.

Whilst the fall out is only now becoming evident, the problem does not have an easy solution. Wollongong Council is looking at changes to allow more flexibility and increased floor space ratios in certain zones, however this will not result in a quick fix. More supply would definitely assist, such as BlueScope making surplus lands available, but that does not appear likely in the short term. Easing of demand is the main pressure release here and only time will reveal how this plays out.

Buying Real Estate Selling Real Estate Commercial Real Estate Investing in Real Estate Real Estate News Awards Residential Real Estate Commercial Property Auction Renting Selling Sydney Office Leasing First Home Buyers Hints & Tips Renting Real Estate Office Leasing Pets Wollongong Illawarra Lease Wrap Retail Property Childcare Childcare Investments WA MMJ News Awards & Recognition Green Buildings Portfolio Managemnt Track Record Investment Investment Property Buying Buying Northern Suburbs Commercial Centres Community Charity MMJ Team Pricing Indicators Pricing Attracting Buyers Interest Rates Events Office Fit-Out Interior Design Leasing Commercial Leasing Tenants Landlords Finances Market Conditions Trends Offices Property Styling Property Investing Business Sales Research Property Management #realinvestor government Government Grants Renting Property Selling Guide Sixty Years MMJ Teams COVID-19 Town Planning Property Development Project Marketing Advisory rent rent Valuation Development Real Estate Next Move Developers New Appointment Melbourne Real Estate MMJ Family Asset Services NSW Child Care Investments Child Care Perth Real Estate Asset Management active apartment penthouse Employee Sydney Real Estate Wollongong Real Estate Legislation Industrial Empowered Stars Of Wollongong Business Sales Team Business Spotlight rental property MMJ Nowra 2023 Housing Market Auction Clearance Rates Residential Sales Town Planning & Advisory Industry Change Laws Commercial Sales Commercial Management Residential Management MMJ Wollongong MMJ Central Coast Strata Issue 8 Hysata Sicona History Conveyancer Solicitor Commercial Market Update Commercial Asset Management Making A Difference Types of Buyers 2024 Listing Your Home Smoke Alarms Issue 9 Escabags BubbleBerry Rental MODCO Property Market