Sydneys west faces historic stock shortage of speculative industrial projects
Sydney's west faces historic stock shortage of speculative industrial projects
| 20 August 2019
Speculative industrial construction is expected to hit an historic low in Sydney’s outer west according to new CBRE forecasts, which highlight a shortage of zoned industrial land with readily available services.
CBRE’s latest market review tips that speculative construction in the outer west, Sydney’s largest industrial sector, is expected to remain limited until at least the first quarter of 2021 – presenting a window of opportunity for developers.
In previous years, the average take-up of spec buildings in Sydney’s outer west has been circa 110,000sqm per annum.
However, CBRE’s data shows that only 27,000sqm of approved projects are currently available for delivery in 2019. In 2020, there is currently only one building approved and scheduled for completion totaling 32,000sqm.
Cameron Grier, CBRE Regional Director, Industrial & Logistics Services noted; “This presents a real window for developers to capitalise on the lack of supply and provide high quality projects that meet occupiers’ design requirements.”
Frasers Property has already capitalised on pent-up demand with a 15,900sqm commitment to TTI at a speculative project that was recently completed at Eastern Creek. The deal was inked prior to practical completion.
Frasers General Manager Ian Barter noted; “Spec buildings in Western Sydney have performed strongly in recent times and we see this trend continuing as supply decreases as a result of the lack of development opportunities across the broader market.”
Mr Grier said an analysis of lease deals over the past three years highlighted that developers had achieved an average 5% premium on the face rental and needed to pay an average of 17% less on incentives when signing deals in speculative projects as opposed to pre-lease deals
"We believe the low supply of speculative projects will keep upward pressure on rents and lead to a further tightening of incentives in the outer west,” Mr Grier said.
“It may even force some tenants to look to the south west and central metropolitan markets, where there is going to be more available speculative stock, with stock totally 106,000sqm and 208,000sqm respectively planned and under construction in these markets for delivery prior to 2020,” Mr Grier concluded.
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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 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 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.