Inside South Sydney’s Vertical Industrial Boom

Owner-occupiers are flooding the strata industrial and logistics market in South Sydney where it is now cheaper to buy than rent.

More than 85 per cent of a 57-unit development at Precinct 45 in Banksmeadow has been sold ahead of completion of the development, which is due at the end of this year.

The Ramsey Property Group development has units ranging from 40sq m to 322sq m with separate workspace and industrial zones that appealed to e-commerce businesses and last-mile delivery strategy, according to CBRE’s head of South Sydney industrial William Gathercole.

CBRE's head of industrial and logistics research Sass J-Baleh, who will speak at The Urban Developer’s Industrial and Logistics vSummit later this month, said the accelerated growth in e-commerce in Australia was forecast to continue.

J-Baleh said the step-change in demand would encourage the repurposing of large format retail to last-mile delivery strategies, as well as the adoption of vertical and multi-storey logistics developments.

“Given the growing need for smaller last mile space and the limited supply of zoned industrial land in these locations ... there is the possibility for last-mile logistics to take place outside traditional industrial and logistics precincts,” J-Baleh said.

“This can include under-utilised space in shopping centres ... where the concentration of e-commerce end-users are located.

“In the Australian market, there is now a real focus on demand planning-forecasting for businesses to position inventory in the right locations.”

J-Baleh said large-scale distribution centres were dominating the industrial and logistics sector, making up about 90 per cent of demand, while the balance was for last-mile centres.

She said there would be a “flight to quality”, which could render secondary grade stock obsolete.

Gathercole said owner-occupiers were outnumbering investor buyers at Precinct 45 in a very buoyant industrial strata market.

“Coming out of the uncertainty of 2020, owner-occupiers and investors alike are looking for value,” he said.

“I’ve never seen the industrial strata market this buoyant in South Sydney, and we expect this surge to continue due to the low-interest rate environment and limited amount of industrial supply available.

“Owner-occupiers are purchasing rather than leasing as it is now cheaper to buy than rent, and buying also opens up repositioning and investment opportunities down the track.

“Investors, meanwhile, are chasing the 5 per cent yields that industrial property can offer in comparison to the 2 per cent you may achieve when investing in residential, while the lack of supply in South Sydney means it’s easy to find tenants as rents continue to rise.”

Base Alexandria, another boutique industrial strata development in South Sydney, will further test demand for this burgeoning asset class in the area.

Made Property's three-storey SJB-designed development will comprise 36 units between 62 and 221sq m, and is due for completion at the end of 2022.

CBRE agent Isabel Ross said demand for small and medium warehouses was booming in locations close to Sydney’s CBD, airport and port.

“With developments such as WestConnex, South Sydney is now better connected to the rest of Sydney than ever,” Ross said.

“Small businesses are looking to re-establish themselves and the lack of industrial land in South Sydney means Base Alexandria is one of the last, new strata opportunities for owner-occupiers.”

For more details about The Urban Developer's Industrial and Logistics vSummit click here.