Western Sydney industrial development to skyrocket in 2018
Sydney’s western suburbs will have the lion’s share of major industrial developments being completed next year as tenants move out of the increasingly residential inner southern suburbs, according to new research.
About 93 per cent of industrial developments larger than 5000 square metres in the pipeline in 2018 are located in western Sydney, up from 77 per cent in 2017, Colliers International research shows. The lion’s share will be taken up by the outer west, accounting for 39 per cent of the pie.
Just 7 per cent will be in the once popular industrial areas of south Sydney, which includes both the inner south and the Sutherland Shire, while no projects are planned for the northern suburbs.
Those sitting on land in the west are netting eye-watering profits, with land values in the south-west and outer west growing 45 per cent and 40 per cent in the past 12 months.
About $3.2 billion of industrial property sales worth at least $5 million were recorded nationally from January to October 2017. The figure trends below the five-year annual average of $6 billion, reflecting a shortage of listings.
About 70 per cent of those deals exchanged with domestic buyers. Most of the offshore investors come from the US.
Colliers International research manager Sass J-Baleh said western Sydney was stepping up its role as the city’s biggest industrial precinct.
“The supply share that’s being delivered is getting greater and greater in western Sydney,” she said.
“The industrial supply development is a really good indicator of supply-led demand; these developers know that they’re going to be occupied.”
The Sutherland Shire is another market in Sydney where inner-suburban tenants are relocating to because of its proximity and cheaper prices, making it a “huge focus” for agents, Ms J-Baleh said.
Smaller scale tenants occupying strata warehouse units priced out of the inner southern suburbs, such as Mascot and Alexandria, tend to move to the Sutherland Shire rather than the west. This is despite the outer south region leaping in value by about 50 per cent in the past three years, Colliers International data shows.
Mirvac’s industrial estate Calibre in Sydney’s Eastern Creek is one major project to be delivered in 2018.
“It’s relatively cheaper but we expect that (price growth) to rise as well because it’s more feasible for local users to relocate there than to stay in the inner south area,” Ms J-Baleh said.
“We’ve got more of the larger tenants that service the whole Sydney metro population going out west because they need to be closer to the motorway network, whereas Sutherland Shire doesn’t really have that motorway connection.”
Looking ahead, while the spotlight was currently on logistic warehouses, Ms J-Baleh pointed out that utility-type industrial properties could be the “next big thing”.
“We need to retain land for critical utility services,” she said.
“Those those needs – for example waste management – will see an increase in focus, especially as more industrial-zoned land is rezoned to mixed-use.”
She said that after the demand for logistics properties cooled in the next few years, investors would need to diversify where their funds go, ramping up interest in utility-type assets.
“There’s still a huge emphasis on logistics and you’ve got the growth of e-commerce which is going to carry that, but there’s only so much that industry can grow.”
