Although investment sales have been scarce, there's an "increased appetite" for higher-valued assets within the Illawarra's commercial/industrial property market.
That's according to property valuation and advisory company Herron Todd White's latest report, which looks at movements and trends within the Illawarra's commercial/industrial and residential property markets.
The report says the Illawarra's industrial sector continues to be the "most buoyant" of the three main commercial property classes.
This is driven primarily by activity surrounding the port of Port Kembla, a profitable steelworks, mining activity which has rebounded over more recent times and a strong Sydney industrial market.
Owner-occupiers and private investors are active in the region, while there is also an "increased appetite" for higher-valued assets as illustrated by the June 2019 sale of 1 Darcy Road, Port Kembla to an owner-occupier for $8.6 million plus GST.
"Investment sales have been scarce due to the lack of properties available," the report said.
"Analysed market yields are hovering between six and seven per cent and even lower for sub-$1.5 million properties in industrial precincts near the Wollongong CBD.
"Agents are reporting some upward pressure on rents due to limited stock with gross face rents typically ranging from $100 to $150 per square metre and even higher for smaller modern style warehouses."
In the report's residential component, Herron Todd White's South East NSW residential director Chris McKenna said the Illawarra experienced strong capital growth from 2013 through to 2017 "and in that time rents also increased, but not anywhere near the same pace".
He said as a result, residential yields had compressed.
He cited the example of a sale of an eight-unit building in Smith Street, Wollongong.
The property sold in November 2014 for $2.23 million with an assessed gross yield of 4.8 per cent.
The same property sold again in August 2018 for $2.675 million.
The rents for the units had increased, but this still represented a gross yield of 4.28 per cent.