The Sydney industrial and logistics market has recorded the lowest market yield on record for the state.
According to CBRE’s Q2 Industrial and Logistics MarketView report, Sydney’s yields compressed to 5.9% for super prime assets.
The report states that the sale of high quality industrial assets in Q2 helped drive down yields and reinforced the continued demand for high value assets. Two significant portfolio sales occurred in the quarter including the Simonson Industrial sale of six outer west assets for $71 million. 205 Fairfield Road Yennora an asset anchored by ‘The Iconic’ was sold to Propertylink for $46.6 million.
Land values are also increasing, with NSW seeing on average 9% annual growth over the past 20 years; North Sydney and South Sydney being the strongest performing regions recently.
Elijah Shakir, Director, CBRE Industrial & Logistics, said that the average price for 1.6ha land parcels in Sydney recorded an impressive 40% y-o-y growth. There has also been increased activity on the 3-6ha range.
“We are continuing to see land values and capital values rise at a rapid rate due to increasing demand from owner occupiers as well as developers taking on speculative risk without pre-commitment,” Mr Shakir said.
“At Yennora, CBRE has exchanged contracts on over $72 million worth of land disposals in the past 18 months, with the average parcel of land being over 2 ha. These transactions have occurred in the highly successful land sub-division of the former Alcoa site.”
According to the report, supply is expected to increase by 60% in 2018, with large projects in the outer west and outer south west.
“The land supply level is almost non-existent for large corporate owner occupiers looking to be in the centre of Western Sydney. In the past, there was an abundance of land opportunities available for purchase but this is now no longer a reality for this style of user.”
“We have seen a shift in the mentality of large corporate owner occupiers seeking land over 3 ha in Western Sydney, who now have to consider alternate options such as leasing or moving to the outer areas.”
The report states that rent growth remains strong, with super prime net face rents increasing 1.3% to $131 per sqm and secondary rents growing 1.1% to $110 per sqm over the quarter. This growth is expected to continue through to the end of 2017 and start to slow early in 2018.
About CBRE Group, Inc.
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.
