Industrial property will be one of the busiest in coming years as demand increases for storage and distribution of goods bought on the internet.
There will also be a rise in demand for warehouses from the transport and logistic firms, such as DHL and FedEx to distribute the goods from the centres to customers and retailers.
Schenker Australia (DB Schenker) is expanding its footprint within Frasers Property Australia’s (formerly known as Australand) Eastern Creek Business Park. Stage four of this landmark 90 hectare development is now fully leased.
According to UBS’s Evidence Lab survey, ecommerce sales should continue to grow as technology changes, driven by consumer’ desire for convenience, efficiency and competitive prices.
This will see an increase in development of vertical warehouses, particularly where land is in short supply, such as in inner-Melbourne and south-Sydney. Year ahead
Darren Curry, Savills director of industrial & business services, said when it came to industrial rental growth for 2018, “vendors should expect an increase in face rents across broader Western Sydney”.
Mr Curry said as existing and speculative “prime” industrial buildings will be in limited supply, owners should be able to capture higher face rents with reduced incentive levels.
“Yields for ???super prime’ will remain steady at 5.5 per cent for ???logistics grade’ buildings with A-grade covenants on long-term lease structures,” he said.
“Demand for well-located, zoned industrial sites will be competitively sought after in the upcoming year. As 2016-17 saw growth of up to 40 per cent in value within some industrial precincts, these values should now remain steady in 2018.”
Mr Curry said the pre-lease markets and supply chain advances in technology would drive pre-lease inquiry in 2018.
”As companies try to improve margins and their earnings before interest and tax, opportunities such as the Moorebank Intermodal Logistics Park will continue to capture significant interest from the Corporate Industrial heavyweights.”
A new development in south-west Sydney at AMP Capital’s Crossroads Logistics Centre, Casula, is now underway, with the official sod-turning ceremony taking place at the site of WesTrac’s new purpose-built facility.
The facility includes a warehouse, workshop and regional office for WesTrac, one of Caterpillar’s largest authorised dealers, that will occupy nearly 24,000 square metres. Construction will begin in earnest in the coming weeks and is expected to be completed by mid-2018.
WesTrac signed a long-term lease with AMP Capital at Crossroads Logistics Centre in March 2017.
AMP Capital managing director, office and industrial, Luke Briscoe said the location was a perfect fit for WesTrac.
“Crossroads offers a strategic location for companies such as WesTrac and Electrolux. It’s located in the growth corridor of south-west Sydney, offers access to arterial road and transport infrastructure as well as retail and lifestyle amenities for workers,” Mr Briscoe said.
”Our strategy is to work with our industrial tenants, such as WesTrac, to develop a site that meets their needs and we’re delighted that construction is now underway on this development.”
According to JLL, buoyed by significant infrastructure development activity, a rise in online retail and the greater pervasiveness of automation, the Sydney industrial sector was undergoing a structural evolution not previously seen before.
In the first half of 2017 alone, JLL recorded about 750,000 square meters of gross leases in Sydney’s industrial sector.
The research says take-up, in the first three quarters, exceeded the average 10-year annual figure. This now marks three consecutive years that leasing volumes have been above the long-term average.
Take-up volumes in 2015 and 2016 both exceeded 1 million square metres. This was due to tenants relocating as a result of withdrawals for alternate use rezoning and infrastructure projects.
In 2017, leasing activity was lifted by organic growth and tenants have been looking to achieve efficiencies by consolidating into larger facilities or campus-style accommodation.
More recently, a growth in demand from retailers, both online and in-store, looking to facilitate digital orders has lifted the underlying requirements for industrial space. Demand from these sectors have reached record highs. Constrained supply
Rezoning, stock withdrawals and increasing demand from the e-commerce and retail sector are among the driving forces underpinning constrained supply and what JLL believes could be part of structural changes driving activity in the medium to long term.
Despite this sustained surge in demand, the supply of new industrial floor space has yet to rise. The rate of new development activity has been limited by the rising scarcity of developable land.
The Sydney market has had four consecutive years with supply below the 10-year average of 524,000 square metres. However, looking to 2018, JLL Research thinks there will be a rise in completions. About 294,000 square metres of industrial floor space is under construction and 260,000 square metres of developments are approved with an anticipated completion in 2018.
JLL’s Michael Wall, head of industrial – NSW, said increased pressure for development stock had exerted upward pressure on land values.
Mr Wall said developers were working through existing land banks and now seeking opportunities to buy large land parcels in strategic locations to accommodate the underlying demand for well-located facilities.
“We are advising our occupier clients with an upcoming requirement to outline how real estate will support their strategic objectives in their business plans and move to secure a pre-lease or existing facility prior to another uplift in rents over 2018.”
In Sydney’s outer central west, average land values (1 hectare serviced allotment) increased in suburb from $450 a square metre in 2015, to $550 a square metre in the third quarter of 2017.
Much of the demand is said to be coming from the growing relationship between the logistics and retail sector.
JLL’s Sas Liyanage, industrial research manager, said limited availability and increased demand from the e-commerce sector had exerted upward pressure on rents. The rental growth in the year to the third quarter of 2017 was well above that typically recorded for the Sydney market.
“Over the past 10 years, the average year-on-year face rental growth in Sydney was 0.3 per cent, across both assets classes. This year, we have recorded 4.2 per cent,” Mr Liyanage said.
“More retailers are re-evaluating their supply chain requirements which is driving a net increase in the demand for quality industrial and logistics space.”
This story Administrator ready to work first appeared on Nanjing Night Net.