western sydney industrial land scarcely low
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  • Western Sydney has a shortage of industrial land supply
  • The new Aerotropolis could provide a much-needed boost
  • Prime rents have moved by around 40%

Industrial land supply in Western Sydney is experiencing an acute shortage, with only 2.7 years’ worth of total industrial land supply remaining for development, according to Colliers‘ Western Sydney Industrial Development Update Q1 2023.

While the region has 1,615 hectares of zoned industrial land yet to be developed, only 70 hectares (4%) can support the completion of assets within the next 12 months. Land take-up by industrial occupiers reached almost 290 hectares last year, 54% above the five-year average, according to Colliers’ Head of Industrial Capital Markets Gavin Bishop.

“Developers control 47% of the total 1,615 hectares of land available for industrial assets, with the balance dominated by private groups who have shown limited urgency to progress development in recent years,” said Bishop.

“There are also only 70 hectares of land in Western Sydney that are serviced with foundation infrastructure such as roads, enabling the completion of industrial assets this year, but they primarily consist of lots below two hectares, which are not suitable for big box demand.”

For the past year and a half, there have been various setbacks in planning, servicing, and road infrastructure for the Mamre Road and Western Sydney Employment Area (WSEA) Precincts. These precincts make up 60% of the land available in the area, and as a result of these delays, they will not be able to provide an additional 414 hectares of land to the market until at least next year.

More land set to take off

Experts believe the new Aerotropolis could provide a much-needed boost, with the precinct to add an expected 2,920 hectares of gross area from 2025 onwards, part of which could be leveraged for industrial, among other possible uses for the land.

“Since industrial users have shown a greater desire to accommodate newer, more modern premises, there has been a recent increase in activity from industrial occupiers acquiring Aerotropolis sites, including DHL who obtained 24 hectares for almost $600 per square metre in early 2022,” said Colliers’ Senior Executive of Industrial Jock Tyson.

Demand remains streets ahead of the development pipeline

Colliers’ Director of Research Luke Crawford said that developers have fast-tracked master plan staging to accommodate speculative development and capitalise on favourable leasing conditions to answer demand for new assets.

“While the speculative development pipeline for Western Sydney has increased from 270,000 square metres last year, to currently stand at just under 600,000 square metres for 2023, this is outweighed by current market demand for 1.6 million square metres in Western Sydney,” said Crawford.

“The Outer-West and South-West submarkets will remain the most active for speculative supply this year, with the delivery of major facilities such as the Moorebank Intermodal Terminal (around 100,000 square metres), and the Light Horse Business Hub (around 43,300 square metres).

“We expect rental rates for new developments will grow by up to 10% in some instances, with pre-commitment rents ranging in the order of $190 to $220 per square metre by end of the year.”

Prime rents up 40%

The Colliers report found that prime rents have moved by around 40% across the market in Western Sydney.

Retail was a key driver of demand over the past 12 months, accounting for 40% of land take-up in Western Sydney. The report highlighted deals including Winning Appliances, Bunnings, and Woolworths.

Investment volumes dropped slightly from 2021, down to $1.2 billion from $1.5 billion, the report noted this was due to investors’ cautiousness regarding market fluctuations and capital constraints.

“Following a rise in land values in 2022 by around 27%, there has been a lack of sales evidence this year to demonstrate softening land values in Western Sydney in response to rising yields and elevated construction costs,” said Crawford.

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