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South Australia’s economic upturn lifting commercial property markets, agents say

October 2, 2018

An artist's impression of the new Adelaide GPO Exchange development by Charter Hall.

Forget about riding on the sheep’s back – for South Australia it’s all about jumping on the ship’s deck.

The South Australian economy appears to be finally turning north after the federal government confirmed in June that British defence giant BAE would build nine frigates in Adelaide as part of the federal government’s $35 billion shipbuilding program.

The decision is expected to create 1500 direct jobs at Osbourne, in Adelaide’s north, when the project starts in 2022. Thousands of other positions are expected to flow from the project’s use of Australian steel.

It came on top of an earlier win with French firm Naval Group securing a $50 billion contract to build Australia’s next generation of submarines in Adelaide. The submarines will be constructed from 2022-23.

CBRE director Andrew Bahr said the defence sector along with resources and health was underpinning the first significant growth in Adelaide in years.

The Adelaide Central Market is getting an upgrade. Photo: IStock/georgeclerk The Adelaide Central Market is getting an upgrade. Photo: IStock/georgeclerk

“It’s been a long time since people in Adelaide have had something significant to hang their hats on in terms of being proud of the state and what’s happening,” Mr Bahr said. “With three genuine pillars of growth – it’s not just one – it should be sustainable for a lot longer.”

Many of the defence companies are taking up substantial city office lets as they compete to attract staff who would prefer to be closer to transport and amenities.

“If you’ve got to try and hire people for these new roles it’s a lot easier to say ‘you’re going to work in the city than probably 20 kilometres out of the city in Osborne’’, Mr Bahr said.

A scarcity of office space in the ship and submarine building areas is also driving the big companies towards the CBD for their corporate staff, he said.

South Australia suffered a major blow with the loss of Holden as a manufacturer in October 2017.

However, analysis from property agency Savills shows there is a strong pipeline of work across a number of sectors, which is translating into a recent rise in job advertisements and employment numbers.

Stamp duty on non-residential property transfers was abolished on July 1, 2018. Spending on infrastructure projects and job accelerator grants is also trending up.

The state is buoyed by the injection of defence spending. Photo: Supplied The federal government confirmed in June that British defence giant BAE would build nine frigates in Adelaide. Photo: Supplied

There’s also plenty of building and renovation activity in the city, including the first upgrade in about 50 years of the Central Market Arcade, one of the cornerstones of the city’s market district, which attracts 8.5 million visitors a year. Works are expected to begin in 2020 after the design and community consultation phases.

Construction of Charter Hall Group’s $250 million Adelaide GPO Exchange is expected to be completed in about 12 months. After its two-year build, the Attorney-General’s Department will take up about half of the 24,500-square-metre building on a 12-year lease, and mining giant BHP will inhabit 10,000 square metres on a 10-year lease. The 19-floor GPO development is on a key inner-city site on the corner of King William and Franklin streets.

Daniel Gannon, the Property Council’s South Australia executive director, said business “confidence is bubbling away”. But he called for the state government to reform land tax to allow the state to “truly to become a competitive investment destination”.

Mr Gannon said more must also be done to attract new residents, pointing out that “Victoria grows by more people every 27 days than South Australia grows across the entire year”.

James Young, chief executive of South Australia for Colliers International, said “now is the time for Adelaide to put some rubber on the road … in the form of higher-order job creation and genuine commercial activity”.

“We can use the … obvious momentum we are experiencing to deliver on commercial reasons why business people [should] invest their time and energy in establishing and growing their economic footprint in South Australia,” he said.

 

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