South Sydney industrial property market tightens

Bigger operators snapping up spare space but more is likely to come on line at end of the year, says CBRE

March 5, 2012

Not long after warning that Melbourne’s transport and logistics property market is tightening, real estate firm CBRE has noted the same happening in Sydney’s south.

However, the region can look forward to new space coming on to the marker by the end of this calendar year.

CBRE South Sydney Managing Director Nathan Egan warns a shortage of quality warehouse space is emerging, "meaning that incentives were now reducing back towards a more traditional rate of one month rent free per year".

Toll has leased recently a modern office/warehouse within Goodman’s Airgate Business Park on an eight year term.

The property at 283 Coward Street, Mascot, has a net lettable area of 12,405 square metres with office space and onsite space for 250 cars.

In another recent deal, Direct Couriers committed to the Portside Distribution Centre on a seven-year lease at about $140 per sq m, CBRE says.

The 6,265 sq m unit is located at 2-8 McPherson Street, Banksmeadow.

"Direct Couriers committed to a larger facility than their requirement as they recognised the value of securing a quality premises for a long period of time," Egan says.

"The property was only on the market for three months – which is a very short period of time.

"In both this instance and in the case of Toll Transport, the tenants recognised the lack of supply of quality warehousing that was available and the real need to commit."

Egan says that the size and scale of both lease deals indicate large transportation operators view South Sydney as a long-term and strategic location to have a business base.

CBRE Research Analyst Gareth Dingle says data shows that the lack of A- and B-grade distributions centres in South Sydney has resulted in a growth of net face rents of 3.7 percent and 8.3 percent respectively over the six months to December.

Dingle says that this and the lack of available stock is leading to firmer yields.

Looking ahead, some new supply is the in the wings with over 62,617 sq m of stock expected to be delivered in South Sydney by the end of 2012.

CBRE expects this to bring the new supply above the five year (2006-2010) annual average of 48,322 sq m.

"Despite the rezoning of industrial space in the sub region to allow for residential development, a number of new projects are scheduled for complete in the next year,’ Egan says.

"Some significant developments due for completion by the end of 2012 include a number of unit estates in Kingsgrove and Mascot.

"In addition, demand for older warehouse sites in South Sydney continues with developers and investors keen to capitalise on the area’s ongoing transformation."

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