The impact of emerging industries on industrial property

Commercial,IndustrialThursday 22 December 2016

Aged care, e-commerce and education are among the fastest-growing industries in Australia, prompting industrial property investors to rethink their real estate strategy.

Growing up and staying at home

In what Deloitte has referred to as a “collision of health costs and ageing,” Australia’s population is seeing both an increase in birth rates and a longer life expectancy. There will be increased demand for medical services, child care centres and accommodation for the aged. Aged care is set to be the fastest growing industry in the next 25 years, and will likely need greenfield development. This will mean a long lead-time to meet burgeoning demand. In the interim, developers can look at providing more retirement units for independent living in suburban areas, situated close to medical and community services.

At a click

Online shopping is changing the model of the traditional “bricks and mortar” shop. Based on data from IBIS World, a recent report has confirmed that the shopfront is here to stay, but retailers need to find ways to incorporate online into their businesses. Purely online businesses can use a pop-up shop to expose customers to their products, and this is a good way to utilise vacant premises on retail strips. The trend towards online will mean an increasing need for logistics distribution centres. The fastest-projected online growth is in household goods. Traditionally sold in bulky goods centres, these will now be stored in warehouses and shifted through distribution centres.

Education and research

International education is Australia’s fourth largest export, and, according to the International Education Advisory Council, student numbers could grow to 520,000 by 2020, with another 146,000 enrolments in that year. There will be increased demand for large residential unit blocks to accommodate an increase in students.

In line with an increasingly diverse pool of creative and academic minds, the Australian Government’s Industry Innovation and Competitiveness Agenda includes a commitment to improve the commercial return on research. To make this a reality, there will be increasing demand for spaces which foster collaboration between academics, technology experts, start-ups and big business. This sector will see a trend towards community office hubs (which can be situated in under-utilised spaces in metro areas) and business parks.

In what can be a high-risk and volatile sector, emerging industries are good news for industrial property. By realigning real estate investment with industries which are only set to grow in the next 20 years, investors are more likely to enjoy guaranteed tenancy and robust returns.

If you would like to find out more about the implications for your real estate investment strategy or industrial property portfolio, talk to one of our Commercial and Industrial property consultants.