Tight Supply To Drive Industrial Property In 2023

Ongoing supply constraints in the industrial property sector are likely to continue to keep values elevated in 2023.

According to Knight Frank Australia’s 2023 Outlook Report, the industrial sector is facing dramatic undersupply of stock.

“Much of the ‘available’ space is still under construction with very limited existing stock available and as a result, lease deals are increasingly being negotiated 6-18 months in advance for existing space,” CEO of Knight Frank Australia, James Patterson said.

The Outlook Report predicts that the focus in industrial will shift from rapid upscaling to strategic optimisation of the distribution network, encompassing cost, location, design, operational and environmental considerations to maximise returns from significant investments in property and technology.

Chief Economist at Knight Frank Australia Ben Burston said the industrial sector remains the one to watch, with the market expecting a record year for development completions in 2023, led by Brisbane and Melbourne.

“While this will be welcomed by tenants, it is still likely to be insufficient to restore a more normal balance between supply and demand, particularly in Sydney, with an equilibrium unlikely to be restored until a larger quantum of developable land comes online in 2024-25,” Mr Burston said.