Sydney's Industrial Market Smells Revolution In The Air

Construction in Sydney’s industrial sector will surge to pre-GFC levels over 2017 in reaction to changing retail habits and the entry of global players including Amazon, according to LJ Hooker Commercial’s latest Industrial Market Monitor.

More than 720,000 square metres of industrial construction is planned across Sydney this year, representing a 28% increase on 2016.

Despite the rise in construction, rents were largely stable across the city last year, as net absorption offset the withdrawal of stock for residential repurposing, except in the city’s south where prime rents surged 9% to $161psm due to a scarcity of stock.

Until 2020, rents were tipped to average 5.5% growth across the city’s Outer, Inner-West and North industrial hubs, which finished 2016 with average rents of $113psqm, $133psqm and $168psm, respectively. Rents in the city’s south, however, could grow at twice that rate over the period, according to The Monitor.

LJ Hooker Head of Commercial Christopher Mourd said developers had re-invented the sector in the last five years to address the changing economy.

“We’ve seen somewhat of a new industrial revolution, especially through Sydney,” Mr Mourd said.

“The retail sector has undergone a structural change in response to consumer habits, and that has reinvigorated the industrial market. Retailing has joined logistics in driving the change and developers have responded with a program of large warehouse developments focused on maximising efficiencies.

“Our agents have reported strong levels of enquiry from private landowners looking to sell to developers to realise the capital growth in their assets, while existing landlords are seeking guidance on repurposing to attract this sector.

“With the likes of Amazon planning a major foray into Australia, the industrial sector is attracting major developer activity.”

Western Sydney’s speculative warehouse sector continued to be a boon for developers with stage one of Charter Hall’s M5/M7 Prestons logistics park the latest distribution facility to be fully-committed ahead of completion.

Specialist FMCG distributor BAM Wine Logistics committed to 10,300 square metres of logistics space on a seven-year lease term within stage one of Charter Hall’s M5/M7 Logistics Park.

The lease, secured by LJ Hooker Commercial Silverwater Director Marcel Elias, was for $1,163,900 equating to $113psm.

“In 2016, not a single speculative development within Western Sydney was completed prior to securing a commitment from a tenant which is unprecedented," Mr Elias said.

"Many tenant briefs are contractually driven which often does not take into consideration a lengthy lead time, therefore timing has increasingly become a major influence.

"We see this trend likely to continue into 2017 and beyond.”