There's a hidden factor behind the collapse of many Australian manufacturers and businesses - and that is the monstrous cost of industrial/commercial properties.
Most businesses rent their factories and offices, and the rents are nothing short of horrendous.
A very large percentage of the price you pay for products from businesses operating from the commercial areas of our cities goes towards rents (and property outgoings, which are tacked on to the already high rents).
This is why purely online businesses have a substantial competitive edge (over "bricks-and-mortar" businesses) - if they can operate with minimal property requirements.
Just recently, in my neck of the woods, a long-established truck dealership moved out of a suburb on a major highway, about 7km from the CBD, to a newer, bigger, and fancier commercial property, in a new commercial area about 19kms from the city.
This major truck dealership has recently folded, to the chagrin of many truck owners. Discussions have revealed that the fancy new commercial premises were costing the dealership over $30,000 a month in rent.
That is just the basic rent cost. Outgoings (land and water rates) often add another 10% to the cost of the rent.
Commercial property is essentially vastly overpriced here in Oz. It has rocketed in values out of all proportion to other costs and business outgoings.
Rents are based on commercial property values, so the higher the values go, the higher the rents go.
Strangely enough, we haven't seen any major correction in commercial property values - one that is well overdue. Yet, I can tour around any commercial areas here and find a wasteland of empty factories.
Some commercial areas have around 20% vacancy rates, and the commercial vacancy rate is getting worse, not better.
In another large country, far away to our North - a place where a sizeable percentage of the worlds manufacturing now takes place, commercial property is relatively cheap, and in this country, if you show interest in starting a commercial manufacturing operation, you are welcomed with open arms by the local Govt body, and you are often
given a factory rent-free, for an extended period, until your operation is successful, and producing profits.
Of course, that factory given to you, rent-free for 2 or 3 years, wouldn't do anything to assist your business competitiveness, would it?
