JLL’s head of industrial NSW, Michael Wall said, average land values in Sydney rose by 37 per cent over 2017 due to positive tenant activity, the rise in demand-led construction and a reduction in land. This rate of land value growth has never been seen in the Sydney market.
“Positive leasing activity and a reduction in stock availability has provided an environment for above trend rental growth. In 2017, Industrial rents across the Sydney market grew by the strongest annual growth rate in 12 years,'' Mr Wall said.
“The Sydney industrial market is in the midst of a cyclical upswing with investor and occupier activity above historical benchmarks.”
Positive conditions have also supported expansion in development pipelines. JLL Research forecasts that 2018 completion levels will be the highest since 2008.
More than 524,000 square metres of developments are already under construction, and anticipated to complete within the year.
However, concerns surround the availability of industrial development land and the resulting implications on supply. Another concern, and perhaps more importantly is the rate at which supply can respond to changes in demand.
According to Colliers International, who have made record sales in the area in 2017 and 2018.
An influx of buyers, owner occupiers and tenants are relocating from South Sydney to the Sutherland Shire, due to low supply and to avoid the premium rental prices and shift from industrial to residential zonings.
Colliers International have sold $11.8 million in freehold sales in the Sutherland Shire in 2018 alone and have launched and sold numerous new industrial strata developments to the area which have achieved record prices totalling sales more than $20 million.
These new projects include 29 Bay Road, Taren Point a brand new 13-unit industrial estate which sold out within 3 months and 40 Cawarra Road, Caringbah a brand-new showroom, office and warehouse development plus 94 lock up storage units.
“The Sutherland Shire has experienced unparalleled industrial growth over the past 2 years, thanks to low industrial stock in the whole of the South Sydney market, which is widely perceived to be under supplied,” said Edward McFarland, senior industrial executive at Colliers International.
“The extremely low level of stock on market, as well as a continuing depletion of industrial zoned land in South Sydney, has led to more users seeking to locate toward the outer southern market, that is the Sutherland Shire, where industrial space options are greater,” said Colliers International associate director of research, Sass J-Baleh.
“Most of the recent industrial developments in the South market have been multi-story industrial units to maximise floor space ratios and market values,'' Ms J-Baleh said.
“It is expected that multi-level strata industrial units will continue to be developed over the next few years to meet the growing demand.”