Across Asia, multistorey warehousing has been commonplace for a number of years due to land scarcity and the resultant high costs of land. The reason why Australia doesn’t have multistorey warehousing yet is that these assets haven’t made sense financially: industrial market rents and land values have been low enough to support single-storey developments in all locations.
But that is changing. Industrial land values and rents within inner-city locations such as South Sydney and Inner Melbourne have grown sufficiently over recent years to the extent that multistorey developments will soon be feasible. These inner-city areas will be in high demand from occupiers willing to pay higher rents for optimal locations, with these rents offset by other savings such as cartage rates, toll and transport costs and various port charges. Our analysis indicates that multistorey warehousing in South Sydney and Inner Melbourne will become feasible by 2020 and 2023 respectively. Given the project lifecycle from acquisition to completion, multistorey developments are worth considering now.
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