_Sydney’s established and emerging industrial markets

To understand potential land pricing, we have assessed recent transactions in two distinct categories of established infill locations and emerging locations within Sydney. 

Planning to protect employment lands for the anticipated growth in transport and logistics business activity, combined with limited arterial roadways and the increasing congestion of Metropolitan Sydney due to widespread urban transport infrastructure development, means users are heading out further west but sticking to the motorways.

Industrial development is at record highs, led by speculative development projects, with distributors, logistics operators and retailers looking to incorporate supply-chain efficiencies.

Five years ago, 66% of new supply was on the back of pre-commitments and only 20% stemmed from spec developments. Fast forward to 2018-2019 and spec development accounts for almost half of all new supply.

Combined with continued population growth, increased congestion, rezoning and redevelopment in Sydney’s West, developers and users are moving from traditional industrial precincts of Arndell Park and Yennora to further Outer West and South West markets, focusing on locations along the major road network, such as M4 and M7 Motorways.

Evidence of land sales in these areas include:

Emerging Market Assessment

As evidenced by the Greystanes and Gregory Hills transactions, land values are from $350 to $500 per sqm, with easy access to the M4, M5 and M7 motorways, offering corporations convenient access for truck movements, proximity to logistics intermodals and access to key employment areas, such as Parramatta, Sydney and Liverpool.

Development stock pipeline levels reached a peak last year at 640,000 sqm, with 90% of this development stock being delivered by institutional owners in the Outer West and South West markets. We anticipate the development pipeline for next year to be slightly less than this year, at around 579,650 sqm (drop of 13%), then setting a new benchmark in 2021 of around 763,512 sqm. A real concern is that the following year (2022) the development stock pipeline will be cut by more than half (56%) to approximately 332,891 sqm. Given the ongoing increase in e-commerce activity and importance in our industrial market of transport and logistics, this lack of future supply will keep pressure on rent and land values in the short term.

According to the NSW Department of Planning & Environment, less than 20% (18.7%) of the land, larger than 1 ha, currently zoned Industrial is serviced and therefore developable in the short term equating to 646 ha out of 3,451.4 ha.

In the short to medium term (next 5 years) we will continue to operate in an environment of high demand and low supply or even land shortage. Provision of services and the timing of unlocking industrial zoned land may not keep up with the pace of demand however, we believe this will change in the medium term with zoning, servicing and development of new industrial land parcels around the future Western Sydney Airport.