Sydney’s industrial sector has experienced an influx of new stock as developers capitalise on the city’s tight vacancy rate and strong market conditions to launch speculative development projects.
CBRE’s Q3 Industrial and Logistics MarketView report highlights that around 193,000sqm of new industrial stock was added to Sydney’s industrial market last quarter – 80% above the 107,000sqm added in the previous corresponding period.
CBRE’s Kate Bailey, Head of Logistics and Retail Research, noted; “With vacancy at cyclical lows across the manjority of submarkets, we are seeing increased levels of speculative stock as developers look to captialise on strong market conditions.”
“This continues to have a significant impact on land take-up in core markets and has helped to drive land values up 2.2% q-o-q.”
The report also reveals that limited investment opportunity in the Sydney industrial and logistics market has seen the average deal size rise significantly.
“In Q3 2018, industrial sales volumes across greater Sydney totalled $646 million across 23 deals (all above $5 million),” Ms Bailey said.
“Whilst total investment volumes rose 8% from the previous corresponding period’s $600 million, the limited number of deals saw the average deal size rise 45% to $28.1 million.”
CBRE’s Jason Edge, Senior Director of Capital Markets, Industrial & Logistics, said the scarcity of stock for sale was generating strong demand for available assets. For instance, the sale of 488 Victoria Street, Wetherill Park and 16 Lockwood Road, Erskine Park demonstrate the underlying growth in industrial land and capital values over the past 12–18 months.
“488 Victoria St Wetherill Park was last sold in Q2 2017 for $15.5 million ($1,762 per square metre), but was re-sold in Q3 2018 for $18.1 million ($2,061 per square metre), demonstrating a capital value growth of 17%,” Mr Edge said.
“Similarly, the vacant 1.4ha land parcel at 16 Lockwood Road was re-sold in Q3 2018 for $10.1 million ($712 per square metre), nearly doubling in value after being purchased 18 months earlier.”
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