Adelaide lacks space for industries

Delays in establishing electricity, water and sanitation services on new land and the slow release of land in industrial zones are raising concerns among real estate professionals about the future of industrial development to Adelaide and the state’s economy.

Only 10% (146 hectares) of the 1,500 hectares of vacant industrial land the South Australian government outlined in its 2021 SA Land Supply Plan for Greater Adelaide is available for immediate development.

Aside from the fact that all industrial land could be exhausted within two years, the value of industrial land in Adelaide could increase significantly if the problem is not resolved, noted a JLL study commissioned by the South Australian branch of the Property Council of Australia.

“We don’t just have a housing crisis, we have an employment land supply crisis,” said Ben Parkinson, managing director and head of capital markets for JLL in South Australia.

“We will not have enough employment land to support industrial demand. »

The value of industrial land in Adelaide’s north has increased by 300 per cent in the past three years.

If this growth rate continues until 2026, land prices would rival those in markets like South Sydney, where land is limited, the report suggests. Landlocked land: the economic potential of unlocking Adelaide’s industrial land supply.

“Industrial development will become unfeasible for developers and unprofitable for tenants,” the report said.

Demand that is accelerating

The appetite for industrial land in Adelaide is growing rapidly. More than 60 hectares per year were absorbed between 2020 and 2023, driven by growing demand for warehouse space to accommodate a growing population.

JLL SA head of institutional and corporate valuations Tanya Parker said land value appreciation in the far north has been partly driven by the Northern Connector, a key highway completed in 2020 which has increased transport efficiency for businesses.

“The gradual completion of the North-South Corridor will ultimately provide an uninterrupted 78 kilometer route from the bottom of Adelaide to the top,” Parker said.

“This has increased the attractiveness of many industrial areas, both for logistics and warehousing users and for our manufacturers.

“The low supply of industrial land in this context of high user demand has caused the value of land to increase exponentially. »

The South Australian government announced in April that it had initiated the rezoning of 120.5 hectares of rural land in Adelaide’s northern suburbs for use as employment land, i.e. industrial.

But the methodology used in the JLL / Property Council report shows that these lands are not serviced and therefore do not meet the development criteria.

“Taking into account planning, servicing and road infrastructure development, it takes between three and five years to convert non-industrial land to industrial land to the point where it can be occupied,” said Martin James , industrial and logistics manager at JLL. in South Africa.

“Given the scarcity of modern warehouse space in Adelaide and the current low availability of warehouse space to rent, businesses may have no choice but to engage in new facilities through pre-letting or owner-occupied development.”

The report recommends addressing the problem with a $250 million fund to accelerate industrial development by enabling road infrastructure and service provision, and releasing an annual minimum of 25 hectares of fully serviced government-owned industrial land.

Industrial land is a finite resource that must be replaced and replenished as it is consumed by the industrial economy, JLL’s James said.

“You can’t grow your economy if you don’t have the land to do it. »

A dynamic economy

In the first three months of 2024, South Australia became the best performing economy among Australian states and territories for the first time, according to CommSec, the digital banking arm of the Commonwealth Bank.

The state’s workforce is expected to grow further in the coming years due to job creation through the AUKUS nuclear submarine construction program, as well as the state’s transition to renewable energies, world leader.

“Industrial and employment land is home to the buildings where we work, manufacture, receive, store and distribute goods,” Bruce Djite, executive director of the South Australia branch of the Property Council of Australia, wrote in the report.

“Adelaide requires a consistent and adequate supply of development-ready land to support South Australia’s economic growth trajectory.”

To learn more and explore the economic potential of expanding Adelaide’s industrial land supply, watch JLL’s Land Locked video series.