Industrial and Logistics market benefits from a rise in land values
Industrial & Logistics market benefits from a rise in land values
| 4 May 2017
Land values are continuing to buoy the industrial market as the demand for development sites surges ahead.
According to CBRE’s latest Industrial & Logistics MarketView report, the average price per square metre for 1.6ha blocks has increased by 18% year-on-year nationally. In Sydney, the y-o-y increase is nearer 35%, sitting at over $730 per sqm, with the limited availability of quality space driving record growth. A major development site in Q1includes a 26,000sqm site at 79-99 St Hilliers Road in Auburn which sold for $65 million.
Melbourne has also seen a sharp rise over the past year, with a Port Melbourne 8,470sqm site at 18-22 Salmon Street selling in the first quarter of 2017 for $27.5 million.
CBRE Senior Research Manager Kate Bailey said that overall, the industrial & logistics economy is showing continued signs of growth.
“Despite the construction slow down, industrial employment has grown by 1.4% over the year to Q1 17, while manufacturing PMI enjoyed its fifth consecutive quarter of positive growth. Consumption spending grew by 2.8% y-o-y which is supporting continued improvement in demand conditions, particularly in Sydney and Melbourne,” Ms Bailey said.
“Wholesale trade grew by 1.8% reflecting the increasingly important role that e-commerce is playing in the Australian industrial market by supporting continued demand for warehousing space.”
Matt Haddon, CBRE Pacific Senior Managing Director, Advisory & Transaction Services, Industrial & Logistics and Retail, said that sales volumes were relatively soft in Q1 17 after a very strong end to 2016.
“The slowdown in sales was largely due to the strong finish in 2016, with very few incomplete transactions flowing over into the new year, rather than any reduction in demand,” Mr Haddon said.
A number of new campaigns have kicked off in Q117 however, with a number of significant assets currently being marketed which will bolster industrial sales in Q2. These include the GM Holden site in Adelaide, the Simon Transport Distribution centre in Melbourne and the Sydney Six Industrial portfolio.
“Based on the current level of demand and activity, we expect the total value of industrial transactions in 2017 to be similar to, or in excess of, the levels we saw in 2016.”
Australian super prime yields compressed a further 10bps in Q1, primarily driven by the Sydney and Melbourne markets. In the non-core markets, yields are close to the bottom of the cycle with buyers less willing to pay higher prices.
“Across 2017, prime yields are expected to stabilise, with only a small amount of further compression forecast in core markets,” Mr Haddon said.
In the Q1 rental market, only 325,000sqm of new industrial supply was released, 25% less than Q4. This trend is set to continue throughout 2017 which will help to support a growth in rent. The exception to this is Sydney, which will see higher levels of supply including 203,850sqm in Q1. However, Sydney will continue to see positive rental growth, although it will be somewhat softer due to the level of new supply.
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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.