- Over 350,000 sqm of space to be delivered in Sydney over the next five years
- Vacancy rate for industrial properties is edging closer to 0%
- Land values and rents continue to soar
Recently released data from CBRE has revealed that over 350,000 sqm of multi-storey warehouse space is expected to be delivered in Sydney over the next five years.
The data comes as the availability of zoned land forces developers to reach skyward in lieu of single-storey assets.
Colliers Research also recently noted the tightening of industrial land across Sydney.
The CBRE report noted 14 major multi-storey projects across Sydney, including the staggering 172,702 sqm LOGOS development at Mascot, which is scheduled for completion in late 2026.
Other significant projects include the 51,664 sqm three-level Goodman warehouse in St Peters. This is scheduled to be delivered during Q1 2024.
“With vacancy close to 0%, rents skyrocketing northwards, and land prices doing the same, multi-storey has never made more sense in Sydney than it does right now,” commented CBRE Regional Director, Industrial & Logistics, Cameron Grier.
“That said, developers still need to ensure design functionality to ensure these developments are fit for purpose for the Australian market.”
Tightest vacancy rate in Australia
CBRE’s “The Rise of Multi-Storey Warehousing” report notes the significant influence that high land values, low vacancy rates and minimal land supply has on the industrial and logistics market in the nation’s largest city. The vacancy rate has hit a low of 0.4% – the tightest in Australia.
Unsurprisingly, the average super prime net face rent is expected to grow at a double-digit rate annually between 2022 and 2026. Rents are expected to increase north of 12% annually in South Sydney, which is home to 80% of Sydney’s current multi-storey development pipeline.
“Cities such as Hong Kong, Shanghai and Tokyo have built vertical warehouses in order to keep up with occupier demand for precincts with extremely limited space available,” noted CBRE’s Head of Industrial & Logistics Research Sass J-Baleh.
“Sydney is following that trend, with dwindling industrial land supply in precincts that are becoming more sought after as ‘last mile’ distribution hubs due to recent and forecast growth in e-commerce.
“This is particularly the case in South Sydney, which has strong access to the Port of Botany, airport, and the CBD but accounts for only 2.5% of Sydney’s total supply of undeveloped, zoned land.”
Sass J-Baleh, CBRE
South Sydney has the highest land values in Australia, averaging $2,850 sqm for 1.6 hectare lots. This is justifying multi-storey construction costs. South Sydney also has the highest rents in the country – around $225 per sqm for super-prime grade assets.
“As the Sydney market continues to experience unprecedented levels of growth, we expect multi-storey facilities will become an intrinsic part of Sydney’s industrial landscape,” Ms J-Baleh said.
“The significant increase in construction costs associated with multi-storey warehouses are offset in precincts such as South Sydney, given land availability and the desire to be located close to the consumer to minimise supply chain costs as e-commerce accelerates.
“As land values appreciate across the city, we also expect to see an increase in multi-storey warehousing in outer precincts such as the Outer North West and the Outer South West in the medium to long term,” concluded Ms J-Baleh.