Perth investment and advisory firm – SFR Capital – says Western Australia’s industrial property sector will strengthen substantially as local manufacturing grows.
SFR Capital director/co-founder Raj Singh said: “WA’s industrial asset class, within the property sector, is poised to rise in profit and scale as more manufacturing operations are established domestically to shore up supply chains of crucial items including medical supplies.
“Furthermore, if the government does instigate significant policies incentivising Australian manufacturing, the growth in the industrial property sector will be even stronger,” he said.
“Entrepreneurs will need new spaces for factories and warehouses. With online shopping increasing, there is already more demand for logistic-style warehouses. Many facilities in Australian Post stores are woefully equipped to handle vast predicted rises in online deliveries. Big new Amazon-style logistic centres are coming, as Australia’s population grows.”
Many countries globally are looking to bring more manufacturing back home and it’s no surprise Australia’s government is already securing locally-sourced face masks and ventilators.
“This pandemic is shifting the policy focus of our federal, state and local government,” Mr Singh said. “The Australian Government, at all levels, is scrutinising its strategies to encourage local manufacturing and investors in future plants and factories.
“It is hoped banks will start supporting these new solid, domestic initiatives in ‘nuts and bolts’ production.
“Banks may see returns grow from investing into factories rather than players in the tech sector which have often had big ideas but have failed to deliver, disappointing in recent times. Many experts predict domestic manufacturing will boost the economy, with more jobs created and improved consumption within Australia.”
Post-virus, Mr Singh said it was sensible to encourage relocation of PPE (personal protective equipment) manufacturing facilities within the state of Western Australia and he welcomed the recent announcement by WA Health Minister Roger Cook that a WA-based manufacturer will begin making essential PPE for local frontline workers.
Earlier this year Mr Singh attended the Arab Health Expo in Dubai. The exhibition hall was vast, like a small city of booths, stands and promotions. It was crammed with all types of medical devices – from pacemakers to dental implants. "It appeared that, apart from Australia, almost every other country (especially China) was represented prominently at the showcase," Mr Singh said. The PPE items Australian healthcare workers now need – on display at the expo – were mostly manufactured in China.
PPE Cost Hikes
Since February, face mask prices increased from $US0.05 to more than $US 1.50, and the cost of the raw material used to make masks – meltblown fabric – went from $3000 per tonne to $70,000 per tonne. The prices quoted here are at the Chinese manufacturing end. By the time products land in Australia, prices can triple or quadruple due to restrictions on air travel. Some freight costs have actually risen by five times in the past few weeks.
More than 80% of the medical devices or consumables imported into Australia are valued at $A7 billion per annum while medical devices, manufactured in Australia for export, are $A2 billion.
“We are still heavily reliant on other countries to provide most of our basic medical supplies and I can understand why Australia is in this position,” Mr Singh said. “For example, wages are higher in Australia and Chinese production costs are cheaper but we should domestically manufacture more medical supplies to maintain secure supply chains, including that of PPE.”
Raj Singh is a partner and director of recently-launched SFR Capital Pty Ltd, which is part of SFR Advisory Group and has more than $250 million of funds under management.
SFR Capital has recently launched a fund targeting annual returns of over 8%. The Fund focuses on income-generating properties with large land holdings for future industrial/large format retail uses.
Currently the Fund is in process of acquiring Malaga and Wanneroo Markets, with significant land holdings of 4.12 hectares.
This article is one of many featured in 'Adapters', a series in WABN exclusively for Perth Media clients, profiling news of innovative small businesses, investment firms, start-ups and not for profits.
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