Adelaide’s industrial land shortage

Delays with establishing power, water and sewerage services on new land, and a slow release of industrially zoned land is sparking concern from real estate professionals about the future of industrial development in Adelaide and the state’s economy.

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

As well as all industrial land being potentially exhausted within two years, industrial land values in Adelaide could increase significantly if the issue is not addressed, according to JLL research commissioned by the Property Council of Australia’s South Australian branch.

“We haven't just got a housing crisis, we've got an employment land supply crisis,” says Ben Parkinson, managing director and head of capital markets for JLL in South Australia. “We won't have enough employment land to support industrial demand.”

The value of industrial land in Adelaide’s outer north has risen 300 per cent over the past three years. If this growth rate is maintained to 2026, land pricing would rival that of markets like land-constrained South Sydney, according to the report Land locked: The economic potential of unlocking Adelaide’s industrial land supply.

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

Accelerating demand

Appetite for industrial land in Adelaide is increasing rapidly. Over 60 hectares per year was absorbed between 2020 and 2023, driven by increasing demand for warehouse space to accommodate a growing population.

The land value appreciation in the outer north has been driven in part by the Northern Connector, a key expressway completed in 2020 that has increased transport efficiency for businesses, says Tanya Parker, head of institutional and corporate valuations for JLL in South Australia.

“The incremental completion of the North-South Corridor will ultimately provide an uninterrupted 78-kilometre roadway from the bottom of Adelaide to the top. This has increased the attractiveness of so many industrial areas to both logistics and warehousing users as well as our manufacturers,” Parker says. “The low supply of industrial land against this high occupier demand backdrop has increased land values exponentially.”

 The South Australian government announced in April it has initiated the rezoning of 120.5 hectares of rural land in the outer northern suburbs of Adelaide to be used as ‘employment lands’, meaning for industrial use.

But the methodology used in the JLL / Property Council report shows that these lands are not serviced and so don’t meet the ‘development-ready’ criteria.

“If you account for planning, servicing, and road infrastructure development, it takes between three to five years to convert non-industrial land into industrial land to the point where it can be occupied,” says Martin James, head of industrial and logistics at JLL in South Australia “Given the scarcity of modern warehouse space in Adelaide and the current low availability of warehouse space to lease, businesses may have no choice but to commit to new facilities through pre-lease or owner-occupier developments.”

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

Industrial land is a finite resource that needs to be replaced and replenished as it's consumed by the industrial economy, JLL’s James says. “You can't expand your economy if you don't have the land on which to do it.”

A powering economy

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

The state’s workforce is expected to swell further over the coming years with jobs created by AUKUS nuclear submarine building programme, as well as the state’s world-leading renewable energy transition.

“Industrial and employment lands accommodate 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 needs a consistent and adequate supply of development-ready land to support the economic growth trajectory of South Australia.”

This article has also been published in The Industrialist and InDaily.