Author: Barry Cawthorn – Bawdens Managing Director
In Issue 154 of Industrial Property News, we revealed that inflation adjusted rentals had fallen 33% since 1990. In late 2022 with inflation exceeding 7%, we observed growth in gross rentals during 2021 to approximately $150 psm. Whilst still good, this was less than the inflation adjusted rental of $230 psm required to have the same purchasing power today, as the $105 psm gross investors were reciving in 1990.
In 2022, real gross rentals continued to climb with growth approaching 20-25% in many key industrial precincts across Sydney. As 2022 ended gross rentals were approaching $200 psm.
With supply of space still not expected to meet demand in 2023, we anticipate rental growth to exceed 10% throughout the year, taking gross rentals to $220-230 psm for well maintained and located SME space across the metropolitan area. Should this continuing rental growth result in gross rentals exceeding $230 psm, then for the first time since 1990, annualised real returns to industrial investors will exceed the rate of inflation.
For this reason, we expect investors to not (unless otherwise required) dispose of investments as they look to continue to enjoy real returns from rental growth exceeding the rate of inflation in 2023.
For more information, our latest edition of Industrial Property News can be found here: https://bawdens.com.au/bawdens-industrial-property-news-issue-156/
Category: Research, Trends & Insights
Topics: Industrial Property Rentals, Inflation Adjusted Rentals, Data & Analytics
Solutions: Industrial Research, Performance Overview