Industrial land values have surged across Australia in the wake of COVID-19, with regional markets like the Central Coast also sharing in the boom.
Whereas industrial land was achieving $140-$150psm pre-COVID-19, LJ Hooker Commercial Central Coast’s Ty Blanch said the figure was now closer $400-$500psm.
“That’s placing a lot of pressure on development and subsequent supply,” said Mr Blanch.
“There's not a lot of turnover of larger industrial stock, because the replacement cost is too significant.”
The under-supply of new stock is also having an impact further down the line, with smaller industrial stock also feeling the pressure from the trickle-down at the top.
Mr Blanch said the Central Coast’s industrial market was closely linked to the wealth that locals had accumulated in their residential real estate assets during the pandemic.
“The equity that locals have built-up in their home has had a big impact on the local industrial market. Locals might have built-up a few hundred thousand in equity over the last couple of years and have been using that against the backdrop of low interest rates to go from being a tenant to an owner.”
Within the investment market, sellers had previously been securing 5.5-6 per cent yields when selling. But with the cash rate entering a new cycle, Mr Blanch said expectations were now moving to 6.5-7 per cent.
Mr Blanch will soon take to auction a warehouse with more than 1,000sqm of space with office, which is currently tenanted on a five-year lease with another five-year option.
The tenancy is currently generating circa $147,000 a year in net rent.
“There’s significant competition for smaller stock and we anticipate generating a good amount of interest for this asset.”
