Australia’s industrial market has hit a fervent pace with low supply and high demand pushing land values in Sydney and Melbourne to new heights.
The industrial asset class across Australia’s eastern seaboard, most notably in New South Wales, remains very strong with rates of $1,018 per square metre on average.
According to Cushman & Wakefield, strong demand for land in most of Sydney’s major industrial markets has led to double digit growth.
Sites in the city’s south-west have recorded growth of 20 per cent year-on-year to now command $600 per square metre with most owners unwilling to sell their prized industrial assets.
Sydney saw $785 million of industrial assets transacted over the third quarter, the highest since 2016.
The most substantial deal was Mirvac’s $125.2 million sale of a 50 per cent stake in the Calibre industrial estate in Sydney’s west.
The transaction reflected the strong demand for industrial property, which is one of the hottest sectors thanks to expanding e-commerce.
Net face rents in Sydney have also recorded the highest increase of all the states at 2.5 per cent.
In Melbourne land prices continued to soar, particularly for smaller lots, with sites in western Melbourne seeing 16.7 per cent quarter-on-quarter growth, thanks in part to land shortages across all precincts.
“A spike in bespoke, technology driven warehouses, has encouraged developers to compete for vacant land to take advantage of the trend for modernised buildings,” Cushman & Wakefield’s report said.
“As a result of falling vacancy, owners are gaining confidence in lifting their face and effective rents, as seen in the South-East precinct where prime effective rents increased by 8.9 per cent quarter-on-quarter.”
Rents are predicted to increase over the next two years until new supply is brought to the market.
Although tightening credit availability has been evident in some aspects of the Brisbane market, overall investment remains robust.
“Buyers continue to compete strongly for freestanding buildings due to the lack of availability throughout the market.”
Additionally, positive economic conditions, ongoing population growth and major infrastructure projects are anticipated to boost demand.
Across all states, multi-storey warehousing in urban areas is predicted to strengthen, addressing both the scarcity of stock and high price of land.