What’s in a name?

Photo: Carrington Shipbuilding Facility

Shakespeare’s Juliet once famously pondered: “What’s in a name?”

Through the star-crossed lover, the Bard was arguing that 400 years ago, names were secondary to where an individual  might be domiciled. But since the late 16th Century, it appears that names and locations have become increasingly important in life, business and commercial real estate.

To illustrate, a few years ago, a consortium missed out on a Department of Defence contract because its state-of-the art ship yard was in Tomago rather than Newcastle. The contract from Defence stipulated the winning bid must go to a consortium with a facility in Newcastle. A competing consortium realised that names would count to win the tender, and

established a facility in Newcastle Harbour. Guess who won the contract?

A name is important outside the bureaucracy too. I have a client who owned several properties in Charlestown. The 2290 postcode was emerging as a commercial hub.

However, my client was continually beaten on leasing proposals, even though he was often more competitive than the   competition. Finally, my frustrated client paid a research company $15,000 to find out why he was being regularly overlooked. He was told by his research consultant that: “When a head office decides to establish a presence or relocate  to Newcastle, Charlestown just isn’t Newcastle.”

As a consequence, the idle managers charged with establishing the new operation were loath to settle on Charlestown.

Spending windfall

Therefore, when the NSW Government says it’s spending the bulk of its $510m of its $1.75billion windfall from the sale of the Newcastle Port on Newcastle, that’s precisely what’s happening. More specifically, it’s being spent on the Newcastle CBD. But what is the CBD, and who is enjoying the spoils? The Newcastle CBD, which includes Newcastle East and West,  The Hill and Cooks Hill, has approximately 10,500 residents or about 1.6% of the region’s population. The CBD employs approximately 35,000 people or about 11.6% of the region’s workforce. That said, it’s just a small section of the Greater Hunter region, which seems to have been forgotten by the government.

Stronger outlook for 2017

Fortuitously, Raine & Horne Commercial Newcastle takes a broader view beyond the CBD and has been monitoring the suburbs of the Lower Hunter. In, 2011, we introduced our Raine & Horne Industrial Average, which is an annual  measurement of vacancies in the major industrial estates. The result from the 2017 index reflect the improving industrial

market in the Newcastle region, with approximately 42,800 square metres of industrial space being leased or sold in the past 12 months. This is in addition to the creation of an additional 86,000 square metres of industrial space in the last 3 years.

These are impressive numbers; however, we have sought the opinion of 4 influential industrial developers Allan Morton of ATB Morton (AM), Graham Burns of Hunter Land (GB), Tony McLeod of Williams River Steel (TM) and Wayne Brown of Wayne Brown Building (WB) for their predictions for 2017.

Break out: Expect a positive start to 2017

The views of Allan Morton, Graham Burns, Tony McLeod and Wayne Brown are mixed. However, their collective view mirrors that of myself and the team at Raine & Horne Commercial Newcastle. We have enjoyed a positive start to a new year because of a strong finish to 2016.

  1. How was 2016 and what changes did you observe in the market?

AM: 2016 was a steady year, where we saw the first signs of the return of the mid-size industries, who haven’t been around since 2013.

GB: 2016 was a year of micro markets with the ripples from the mining contraction still affecting parts of the market for industrial in various ways. Broadly the further up the [Hunter] valley you go, the tougher it gets.
TM: 2016 in Newcastle was a flat year, however our Sydney operations improved.

WB: 2016 was a strong year with excellent enquiry from industrial, residential and the agricultural sectors. The banks  started to tighten lending towards the end of the year.

This could have an impact in 2017.

  1. How do you see the industrial market performing in 2017?

AM: Momentum will build with the return of mining services to the market.

GB: The lower Hunter Valley has plenty of demand for land and well built pre-leased buildings. However, those buildings ending their economic or functional life will be hard to move and be very price affected. This is not a bad thing as it creates a nursery market and the opportunity to grow future full value user.

TM: I can’t see much of an improvement in Newcastle, construction wise. Apart from a few major projects if you look outside these [constructions] not a lot in industrial, mining or speculation is happening.

WB: We’ve had the strongest start to a year in 5 years. The banks, along with the likes of Boral and BlueScope signalling a 12% increase in building materials, could seriously affect what happens.

  1. What industries have you dealt with in the past 12 months and are they looking to buy or lease?

AM: We mainly deal with manufacturing industries the majority of whom are looking to lease. But towards the later part of the year, we began to see enquiries from manufacture’s from western Sydney.

GB: Users have originated from many places and industries. That said, major interest is from counter cycle strong entities, often with naming and engineering exposure – there’s a lot of consolidation with Mergers & Acquisitions in these sectors right now.

TM: The greater percentage of our work is design and construction clients. There’s not much in the way of speculation happening. There is a surplus of product on the market and returns are around the 5% mark in Sydney, so, without lessees, our clients are a bit hesitant to invest large sums.

WB: Our enquiry is mixed with a combination of lease and outright purchase, although enquires are a little more tilted towards purchasing.

The enquiry is coming from the warehousing and transport sectors, wineries, car dealerships and service stations.

  1. Do you see any changes in the industries looking to locate in the region?

AM: I see no change in the region apart from the increased enquiry coming from Sydney for relocations.

GB: It was hoped that the distribution sector would pick up in 2015 and 2016. It hasn’t happened probably for two reasons. Technology drives down acceptable scale for capital city centric businesses; and rail is emerging again as a  transport option.

TM: I’m personally seeing Newcastle as being very flat and am hesitant to say that any new industries will be few and far between.

WB: We are seeing a move away from manufacturing and towards transport and distribution.

  1. What infrastructure do you see as critical to encourage industrial growth?

AM: Transport infrastructure needs to be completed, including the Hexham Freeway link to the M1. This is essential for the Pacific Hwy and will facilitate a faster and easier flow of heavy vehicles through the region.

GB: For most industry, it’s trucking that makes everything happen. Road transport is getting more effective

and prolific in the lower Hunter and near regional markets. The old chestnut of Port of Newcastle activation as a container port.

TM: Newcastle needs a significant funding boost. Coal is stagnant, aluminium is down and the start of the cruise shipping terminal would boost confidence. The light rail needs to be kicked on ASAP.

WB: Cutting government red tape and fast tracking planning approvals would help. The government needs to free up the Port and allow for containerisation.

 

Written by Steve Dick
Co-Principal Raine & Hoirne Commercial Newcastle

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