June 2015 – Wollongong Industrial Market (sub $5million market)

16 June, 2015 / Vanessa Rader and Ben Mostyn

Transactional activity (sub $5 million) across the Wollongong LGA’s has been reasonably steady over the past four years with the total volume of sales averaging just over $75 million per annum.

During 2014 the total investment was recorded at $76.885 million; limited activity was recorded in the Kiama LGA while Shoalhaven and Shellharbour LGA’s accounted for 24.83% and 10.28% respectively of this total volume. The bulk of investment ($49.319 million or 64.15%) has come in the Wollongong LGA with the suburbs to the north including Coniston, Woonona, Unanderra and Helensburgh witnessing the highest sales volumes. The average sale price has also seen a strong uptick over these four years, growing to $900,000; these properties have been well received by owner occupier businesses together with local investors looking to diversify from residential assets which are achieving a strong yield. However, the investor market either SMSF or private investor are seeking quality assets with a strong lease covenant, secondary grade stock with uncertainty around vacancy remains on the market longer term unless substantial discounting is made.

The trend in volumes is mirrored well in the sales number data also. This time series shows the consistent results of the Wollongong LGA’s industrial market prior to the GFC and the dramatic downturn and lack of confidence in the market during the period post GFC with 2010 the worst year for the region. Since this time however, a pick up in volume and number of sales has returned at a consistent level with sales in the region of 110 transactions in the sub $5 million market over these four years.

The greatest number of sales has come from the Wollongong and Shoalhaven LGA’s while Kiama has limited turnover being a symptom of the lack of industrial land in this region rather than limited demand. Quality investment stock has been scarce in the market and those assets which enter the market with longer term tenancies are in strong demand. Encouragingly for the industrial market has been the improvement in trading conditions across the region; manufacturing has been on the improved over the last 6 months with IRIS Trading Conditions Index growing 16.0% in the last quarter while the Construction and Transport sector has had positive yet more mixed outcomes.

During 2015 there has been limited evidence to date, with only five transactions totalling a little over $2 million changing hands all located within the Wollongong LGA. This limited availability of stock in the market has resulted in this low volume however there is also a lag in data being reported. The expectation is that further sales will filter through during the year particularly given the improved confidence and business conditions and the record low interest rate environment.

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Vanessa Rader (Head of Research)
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