Sydney, 09 May 2016 – A resurgence of local investors in Sydney’s industrial & logistics market has driven sales in the first quarter of 2016 to $318 million – a 40% increase from the corresponding period in 2015.
CBRE’s 2016 Q1 Industrial MarketView highlights an upturn in local investment activity in the three months to March, offsetting a decrease in the number of offshore buyers active in the market.
In Sydney, foreign buyers accounted for just $12 million of sales during Q1, while local buyers recorded a significant uplift in buyer power, acquiring approximately $306 million worth of industrial property.
CBRE Senior Director, Industrial & Logistics, Capital Markets, Matthew Lee attributed the spike in domestic buyers to the increasingly competitive industrial landscape in Sydney.
“While Sydney‘s industrial and logistics market continues to be a sought after market from an international perspective, the limited availability of larger assets is driving investors to chase opportunities in other markets,” Mr Lee said.
“Meanwhile, we anticipate the transaction volume going to local buyers to also continue increasing across the market, with particular strengthening in the $10 million - $50 million price bracket.”
While the national industrial supply pipeline is considerably lower in 2016 – reducing the risk of oversupply and supporting rental growth – 765,000sqm is due for completion in Sydney, a 94% increase from 2015.
CBRE NSW Director, Industrial & Logistics, Michael O’Neill said the local owner occupier market was showing no signs of slowing in Q2, with demand significantly outweighing supply.
“We are experiencing extremely strong owner occupier demand in all markets and size ranges for both existing and turnkey developments,” Mr O’Neill said.
“Purchasers are increasingly prepared to search outside their local precinct given the shortage of stock and relative value in certain areas. This demand is fuelling benchmark rates for both land and existing options.”
Mr O’Neill went on to say that owner occupiers were becoming increasingly inclined to compromise on location and layout given the shortage of stock.
“We expect that some landlords will continue to make the most of the conditions and consider divesting assets that are not being well received by the leasing market,” Mr O’Neill explained.
“Conversely, owner occupiers are also using the opportunity to sell antiquated sites and upgrading into more modern/purpose built facilities. Some of the sales are occurring off market but the strongest results are being achieved with campaigns attracting purchasers from all industrial areas.”
CBRE Senior Research Manager Kate Bailey said the construction sector would continue to be an important driver for industrial space.
“Infrastructure investment will support tenant demand as a number of large projects will either commence or build momentum in 2016 – through buoyed engineering construction and in the operational phase through savings and efficiencies in supply chain costs,” Ms Bailey said.
The report shows residential conversions continue to place upward pressure on rents, with super prime rents lifting 0.7% on the previous quarter to $124 per square metre, prime rents increasing 0.9% $118 per square metre and an 0.8% uplift in secondary rents to $101 per square metre.
“Rent growth continues to be concentrated around Sydney’s outer west and south, with residential conversions continuing to erode supply and push displaced tenants to the outer south west,” Ms Bailey added.
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