Industrial property tipped to exit pandemic most unscathed

According to new research warehouses and other industrial property will likely be the commercial asset class, to emerge after the pandemic, as most unscathed.

While previously Australia waited to witness the direct social and economic impacts the pandemic would have on the property market, now that restrictions are beginning to lift, we are slowly getting a glimpse into what the future is set to look like.

Prior to COVID-19 the industrial property sector had seen growth, with high investment from international groups, in the Australian market. However, just like almost every other sector, the industrial property sector did take a dip following the onset of coronavirus restrictions in Australia. Unlike other sectors, at the moment the demand for industrial property is expected to rebound, with a continued increase in revenue in the coming years.

Industrial property, especially prime-grade assets, in Melbourne were showing to be incredibly resilience at this point, given the state of the economy. In some areas, despite the work from home orders from the government, office space is outperforming industrial property. While this is expected to be short-lived, the areas that already see industrial property outperforming office space are only going to witness a further increase in that margin, as the pandemic continues.

Development activity in Melbourne over the past year has been strong with the continuing increase of industrial spaces. With south-east Melbourne being the most popular destination in the state for industrial property, it is expected to outperform other areas in the following months.

During the stay at home restrictions, online retail in Australia saw a huge increase in sales, as storefronts closed over the country. Due to this third-party logistics companies with capacity, are looking to secure more industrial space to accommodate the demand. This could lead to a huge demand for warehousing over the next six months, especially in Victoria, since it is the hub for national distribution activity.

Retail isn’t the only sector that may be looking for more industrial space, with the current situation resulting in an increased demand for home delivery services. This is where cold storage facilities especially are set to benefit. The requirements for increased cool room and freezer space will be seen across Australian CBD’s, specifically hubs for hospitality and restaurants such as Melbourne and Sydney.

Over this time, we also expect to see an increase in demand for Australian products. The inability we now have to bring a large amount of stock in from overseas, is making customers more conscious of the safety behind where are receiving imports from.  The reduction in export and import activity delivers a huge opportunity for greater locally manufactured goods and services, which can be easily and quickly distributed into the local communities and across the country. Reinvigorating Australian manufacturing of goods and services will result in the need for bigger and more industrial spaces locally. Once again increasing the reliance on the industrial property market for our ability to continue to increase our local supply chains.

Nonetheless, after the pandemic is over securing adequate storage is likely to be the first thought for many companies who saw an increase in their business as a reaction to the restrictions. This will lead the way for industrial property needs to increase even following the pandemic, depending on how long we remain in a crisis state.

This demand for industrial space is expected to remain strong throughout the pandemic and beyond. The situation might also give a boost to local manufacturing activity, which could further stimulate industrial sales and leasing activity.