Once the ugly duckling of commercial real estate, industrial lands are outstripping retail and commercial plots as a supply crunch and demand spikes collide.
According to figures from Illawarra real estate agency MMJ, industrial lands are some of the fastest improving real estate holdings in the region.
The former Bonds factory in Bellambi sold in 2015 for $1.5m and in 2022 was sold again for more than $10m, seeing its value go up more than six times.
Units in the Bellambi Lane development were similarly in demand. In the two years since completion, sales prices have jumped from $495,000 to $690,000, with prices per square metre as high as $4860.
Director at MMJ Travis Machan said that what was driving these increases was simply a lack of supply, and this was accentuated in the case of the two Bellambi sites.
"The further north you go, the less land there is."
At the same time, more businesses were looking to locate themselves in industrial zones, with what were once commercial or even retail tenants, such as gyms, distilleries and furniture retailers, taking advantage of relatively cheaper rents in light-industrial business parks.
However, recent changes to zoning regulations may limit this growth, with some uses such as indoor recreation facilities i.e. gyms, and takeaway food and drink premises prohibited in the new E5 heavy industry zoning, which covers large parts of the Unanderra industrial state, mostly north of Berkeley Road.
At the other end of the market was retail and commercial office spaces, which were seeing a decline in value, albeit for very different reasons.
In the commercial office market space, an influx of A-grade office towers was behind businesses flocking to new, upgraded digs, lowering yields on older, lower grade office stock.
This is a problem that Wollongong was lucky to have, Mr Machan said, as it forced building owners to upgrade older stock and provided an attractive environment for firms to relocate.
"People are expecting more, they don't just want four walls and a clean, cheap space. They are happy to pay for quality," he said.
"It's forcing building owners to improve themselves."
There were fewer bright spots in the retail sector, particularly in the Wollongong CBD, which had been hit by the double-whammy of online shopping and a return to suburban shopping strips during COVID, leading to the many for-lease signs in Crown Street Mall.
Mr Machan said the troubled strip was the only place where lots were being sold for less now than they were some years ago.
"We've seen in results across the Illawarra that Crown Street mall is the only street that is selling for less than the last transaction, there's not one that sold for more," he said.
As COVID-induced trends wear off, the next hot market may be further south, as strong buyer and investment demand remains in the Shoalhaven, with some industrial sites selling for similar rates in Nowra as in Wollongong.
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