A recent report from Moody’s indicated fast-paced activity in technological innovation and e-commerce is driving the industrial real estate sector, reports urbandeveloper.com. 

The report stipulated long-term demand averages are being exceeded by supply which is resulting in a shortage of available industrial land.  The key areas of shortage are close to major transport hubs. 

Moody’s predict that as larger blocks of land become harder to source in Sydney, buyers will be looking for better value, comparable industrially-zoned property in other capital cities such as Brisbane of Melbourne, while continuing to service their Sydney business from these sites. 

Over the past three years, demand for industrial real estate has been driven upwards. Values have increased in Brisbane by 25 per cent, 35 per cent in Melbourne, and 50 per cent in Sydney. 

A lack of quality space in the sector is said to be driving down transaction volumes.

Moody’s told the urbandeveloper.com that rent values will be the next to rise. 

“We expect cap rates will likely compress further over the next 6-12 months, as rising rents support asset values.”

An article in The Australian Financial Review’s written by Larry Schlesinger recently echoed this sentiment, reporting big companies requiring large industrial real estate for hi-tech facilities are in strong demand. Automation is top of mind for many large companies as labour costs grow. Rents are expected to see a strong rise this year, with talk amongst real esate agents, analysts landlords resulting in the belief that "demand from both offshore and local investors for prime assets should continue to drive up capital values.” 

Commercial real estate agents CBRE indicated in the article that rent for prime locations will rise by 3.2 per cent in Brisbane, and the e-commerce sector will play a major role in this. One example is Coles, who, over the next six years will spend $950 million to fit out two mega automated warehouses in Sydney and Brisbane. These automated warehouses will replace five current manual facilities, which in turn will result in doubling the amount of goods that are handled on half the footprint.