Industrial Property Investment in 2024?
While 2023 brought challenges to the overall property market, industrial property investment has held up remarkably well.
2023 saw the continued shift to online shopping, low vacancy, stable rental growth and strong demand for continued industrial specific developments. All these factors have contributed to industrial properties outpacing investments like lower-grade office space, which have been impacted by the current economic conditions.
While industrial properties have performed well in the property market in recent years, this begs the question: is this strength here to stay in 2024?
Online Shopping Favours Industrial Property Investment
COVID is still influencing consumer purchasing habits. Online shopping has experienced astronomical growth in recent years, and it looks like that trend is here to stay. Businesses involved in the retail industry are seeking expansion to meet the demand, which means less demand for physical store space and more demand for logistics centres, distribution hubs and warehouses.
Industrial Property Rents in 2024
Rents have continued to trend upwards in 2023, and even more so for industrial properties. Since the start of 2021, warehouse rentals have increased by an astonishing 40%. More than 12% per year on average.
However, rents showed subdued growth in the second half of 2023 compared to recent years. Why? Tenant demand is easing due to a potentially recessionary economic environment. Businesses may not be able to pass on the increased rents to consumers who are already under pressure from the cost of living.
For industrial property investors, it is important to monitor the trends in rental yields going into 2024 and to understand how they affect the feasibility of investing in properties within the sector.
Can Industrial Property Weather the Economic Storm?
Challenging economic conditions are likely to lead to a temporary easing of tenant demand in 2024. The industrial property sector will be tested by sustained higher interest rates, tight bank lending requirements, the high cost of living and a cooling economy. This leaves less room for commercial property landlords to get into the industrial property market and less room for businesses to absorb or pass on higher rents.
The good news is that the OCR may be near or at its peak and look to ease in late 2024 to early 2025. On top of that, record levels of migration and improving business confidence may support the industrial property market through the tough conditions.
Could Industrial Properties Be a Wise Choice 2024?
Industrial properties can be a good investment to diversify your property portfolio and take advantage of the thriving e-commerce marketplace. In 2024, there will be opportunities for industrial property investment arising from the development of industrial properties in peripheral areas such as Hobsonsille, Westgate, Silverdale and Drury. As with any property investment, it is important to do your research and to understand what you are really getting into before making the call to invest.
How Azure Can Help
Industrial properties are unlike any other commercial property type, both in their benefits and difficulties. The sector is growing, and opportunities are plenty; however, managing these properties can be a very hands-on and complicated task. It may be wise to enlist the help of those who are experienced in managing industrial properties.
At Azure, our experienced team has worked in the industrial property sector for years. We would love to share our knowledge and expertise with you so you can thrive in this growing property sector.
Contact us to see how we can help.
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