Real estate will form the base for modern manufacturing in Australia

Manufacturing can’t just be “switched on” – no one will be walking into a building, switching on the lights and just getting on with it. We need to remember that we are attempting to reverse a trend where we have increasingly sent our manufacturing offshore for decades. It may well take more than the ten years outlined in the modern manufacturing roadmaps to truly develop the scale envisioned by the Government. There will be no twiddling of fingers during this time. In addition to supporting the development and production of technology, goods, resources, components and IP, scaled up manufacturing will also need two core ingredients for success. Facilities and infrastructure.

Industrial spaces were increasingly in demand before COVID

As a sub-sector, it’s interesting that industrial real estate has been experiencing strong demand and rental growth, over the past few years – well before modern manufacturing was on the table. Come 2020 and we saw the boom continuing in the industrial asset class with additional demand for warehousing and logistics related to a surge in online retail as well as manufacturers who sprung into gear for the production of health equipment and others repurposing facilities to pivot to the needs of the new normal. It’s become obvious that real estate investors like industrial products. According to our 2020 Dealtracker, the industrial sector saw the highest volume of M&A activity – continuing a trend that’s been reflected over the last decade we’ve been producing this research.

Underpin private sector activity with policy and with renewed Government investment and confidence in the sector, it isn’t expected to slow down. So for those investing in industrial real estate there is a massive opportunity to align with the Modern Manufacturing Initiative.

New facilities need to be bigger and smarter – much bigger and smarter than we are perhaps used to designing and building in this sector. Government at all levels is talking about incubation hubs and shared facilities. Are we talking the manufacturing equivalent of Silicon Valley or co-located facilities like a university – just with fewer backpacks and more hardhats? These spaces will need to be WiFi enabled, clean and temperature controlled, collaborative, adaptable and digital – and let’s not forget sustainable and energy efficient. Manufacturing in and of itself is energy intensive and data storage and streaming is fast becoming one of the most energy intensive activities in the modern world. Put the two together and tapping into the existing grid isn’t likely an option, requiring additional infrastructure to service these sites.

Then we have the need for further infrastructure investment to cope with higher freight demands – how prepared are our planes, trains, trucks and ships to take up the challenge? Are our ports or airports big enough and in the right places? If moving over land, how can we keep our freight out of the commuter belts? No doubt the real estate and construction industry has a key role to play in solving some of these issues and generally where the infrastructure investment goes, opportunities for the private sector follow.

Federal Budget 2021-22

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New regional centres for modern manufacturing

It’s not just the Federal Government looking to give manufacturing a shot in the arm, For a number of years States such as South Australia have been planning ahead and introducing policies to attract and encourage modern industry. The City of Adelaide has a 10 year Deal with the Australian Government and South Australian Government to grow Adelaide as a destination for research, innovation and entrepreneurialism in technology and the arts. The 2019 City Deal is setting Adelaide up to take advantage of the Modern Manufacturing Initiatives. Other States should be looking at the investments South Australia has made and identify their own natural advantages to encourage hubs for manufacturing activity.

For instance, could Geelong, once the home for Ford in Australia remerge as a manufacturing epicenter for food and beverage? It has existing infrastructure that could be retrofitted and modernised, and Victoria has a well-earned reputation as an agricultural and horticultural centre.

Similarly, Holden was largely manufactured out of Elizabeth in South Australia, and has remarkable access to RAAF Base Edinburgh, not to mention the Space Industry Centre in Adelaide.

In NSW, Newcastle has been gentrifying for many years as homebuyers are squeezed out of the Sydney market, and can capitalise on its access to Australia’s third largest port by volume.

What an opportunity this presents to revitalise these communities and create jobs outside our city centres. More City Deals and Regional Deals that provide focussed investment by all levels of Government, will encourage further investment from the community and the private sector. Where the jobs are, the population and property market follows. Adelaide already has a deal, Brisbane’s is likely to be helped along with its Olympic bid and Geelong signed up in March 2019, with a focus on the visitor economy. Perhaps this could be adapted to refocus on modern manufacturing opportunities and the funding systems are already there to support this transformation.

Modern Manufacturing Initiative

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What is clear is that the Modern Manufacturing Initiative isn’t just set to benefit the six priority sectors nominated. The development of facilities required to bring the initiative to life will require the input of the Real Estate and Construction industry and there will be flow on effects for the regions around them and growth opportunities for those ready to capitalise on them. While supply chain resilience, building capability and competitive advantage for our manufacturing industry are key outcomes being sought by Government, the Real Estate and Construction sector should feel confident in the role they have to play in assisting to deliver this, now and long into the future.