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Centennial Raises the Roof with new Industrial & Logistics Park
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  • Rents and speculative development to surge in strongly performing Sydney industrial market

Rents and speculative development to surge in strongly performing Sydney industrial market

Sydney | 21 May 2018
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Sydney industrial rents continued to surge in Q1, with robust growth forecast for the remainder of the year according to CBRE’s latest Industrial MarketView.

CBRE’s data highlights 4.2% q-o-q growth in prime warehouse net face rents in Q1, underpinned by strong tenant demand and limited new industrial construction.

CBRE Research analyst Freddie Kareh, said supply had dropped markedly, with 145,000sqm of new stock added in Q1 - 29% down on the previous corresponding period.

Mr Kareh noted that this had helped underpin rental growth and growing support for speculative industrial development, particularly in Sydney’s outer west, which was expected to account for about one-third of the 650,000sqm of new supply forecast this year.

“With vacancy at cyclical lows across most submarkets, rent growth is expected to remain robust throughout 2018, with an increasing amount of speculative stock expected over this period as developers look to capitalise on the strong market conditions,” Mr Kareh said.

 “With the growth of e-commerce and increasing focus on last mile logistics, it is evident that landlords, particularly those in the outer west, are well placed to develop their holdings – leveraging proximity to motorway infrastructure with the broader market needs of warehouse and logistics operators who continue to seek supply chain refinement.”

CBRE Senior Manager, Industrial & Logistics, John Micallef said the strength of the market had been highlighted by a range of recent transactions which had set new rental benchmarks and been achieved with limited or no downtime when filling available vacancies.

Examples include 7/2 Southridge St, Eastern Creek – with three tenants competing for the 3,307sqm warehouse/office unit. Mr Micallef said the unit had been leased within a matter of weeks with minimal marketing.

In another instance, a freestanding 4,962sqm warehouse/office facility at 5/1 Foundation Place, Greystanes had been leased for seven years at a net rental of $127.50/sqm prior to the existing tenant vacating.

Mr Micallef also pointed to a recent deal at 18-30 Vallance St, St Mary’s involving a freestanding 9,765sqm warehouse/office. 

“We sold the building for $11.2 million with a two-month leaseback, highlighting that investors will look at properties higher up the risk curve due to the severe shortage of investment opportunities,” Mr Micallef said.

“Within a month of the tenant vacating, we were then able to secure an eight-year lease at $105/sqm net which is a record rental for the area. This was a great result for a building in a secondary location and again was achieved with minimal marketing.”

CBRE Negotiator Adam Tresidder noted that developers were reaping the benefits of increased tenant demand by securing attractive deals on speculative projects.

Examples included 30 Enterprise Circuit, Prestons – a freestanding office warehouse of 1,667sqm which was leased to a multinational occupier for five years at $130/sqm net prior to the building being completed.

“We’re also continuing to see tenants migrating further down the M5 corridor from the once traditional industrial areas of South Sydney and the inner South West,” Mr Tresidder said.

“This was highlighted by a recent deal involving a 1,500sqm occupier in Condell Park who ended up securing a 3,660sqm facility in Smeaton Grange, outside of their original location preference, due to a lack of suitable stock.”


 
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About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBRE), 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 2017 revenue). The company has more than 80,000 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.

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