Transport and logistics driving industrial property


Colliers report puts freight and supply chain demands in the front seat for growth in the sector

Transport and logistics driving industrial property
Supply chain efficiency is a crucial property issue

 

Logistics firms and supply chain pressures and e-commerce are driving industrial land action in Melbourne’s north and Sydney’s traditional industrial precincts, an industrial property study shows.

Colliers International’s major city research and forecast report for the first half of 2014, Investors Tighten Their Grip: Competition intensifies to acquire quality assets, points to strong competition from real estate investors where supply is constrained, along with changes in emphasis as local manufacturing declines and storage for imports becomes a focus.

With Melbourne still hosting the nation’s biggest port, it is unsurprising that  transport and logistics (T&L)deals are happening there but Colliers is tantalising about what is about to happen in the city’s north.

"While there has been limited leasing activity of prime grade space, Colliers International is aware of three impending major pre-lease deals in the north market," the report states.

"These deals will total around 120,000m2 of warehouse space, and are being leased to major logistics firms as well as a large corporate occupier."

Sydney

T&L is making its property strength felt very strongly in the nation’s largest city and this has not been missed by investment houses.

"From an occupier perspective logistics and warehousing remains the engine of growth of the Sydney industrial sector and while this cannot grow above underlying economic activity in the long term, the focus on cost management and supply chain efficiencies in sectors such as retail, are supporting above average growth," the report notes.

"Looking ahead, institutional investment will be the market leading indicator for Sydney industrial market going into the second half of 2014.

"Economic indicators point to rising demand from service-based sectors such as transport, warehousing and construction over taking manufacturing. The scarcity of quality prime assets will be met in the short term by a rising development pipeline in the west, however limited land supply will drive tighter vacancy levels in prime and secondary markets in the medium to longer term.

In Sydney’s south, one of the larger transactions to occur was a 53,000 sqm sale and lease back to Australian Container Freight Services deal at Port Botany

Demand for smaller sites, sub 3,000m2 has been driven by smaller retailers, distributors and warehouse operators.

In the city’s west, "assets with long weighted average lease expiry (WALE) profiles that can attract occupiers from the transport, warehousing and logistics sectors continue to remain a top priority for investors but conditions remain challenging due to a limited supply of available prime assets".

Land values firmed slightly in some markets due to limited supply of developable space,

Melbourne

As usual, Melbourne’s north and west saw a lion’s share of activity but economic torsions meant the east and south-east were also busy.

"The continued contraction of manufacturing in Melbourne will be replaced by direct logistics and third party logistics (3PL) users, as the growing population demands goods, such as cars, that were once made locally and are now imported," the report says.

"All these goods require land for and infrastructure for storage and transportation.

"In the Northern Industrial market, a number of major logistics users are currently in negotiations to lease around 120,000m2 of space, while the west is now a hub for some of the largest distribution centres in the country."

The northern leasing market is characterised by increasing demand for smaller office areas as well as larger areas of hardstand.

"This is a direct result of the increasing prevalence of logistics and 3PL users in the area, who are attracted to the excellent transport links to both Melbourne Airport and the Port of Melbourne.

"The continued growth in e-retailing has also driven demand in the Melbourne north market, as much of this product comes through the airport and quick delivery and turnaround times are absolutely essential for these businesses."

Not to be outdone, the city’s west, a traditional logistics centre, continues to display a high level of activity.

"The pre-commitment market in Melbourne’s west is heating up again, as major corporates look for opportunities to upgrade to new space and also to take on bigger premises.

Colliers International says it is aware of around 220,000 sqm worth of pre-commitment requirements in the market.

"A number of these tenants are existing west-based businesses that are experiencing organic growth and benefiting from growth in the logistics and e-commerce sectors.

"Around three quarters of the pre-commitment requirement currently in the market are from companies that are warehousing/transport related."

The south-east and outer east is also transitioning from manufacturing supply to transport and logistics.

Brisbane

Brisbane’s third-largest call on warehouse space is transport, at 14.9 per cent, compared with services at 17 per cent and manufacturing at 40 per cent, and logistics and Colliers expects more to come following DB Schenker big lease late last year.

 Much of this is focused on areas close to the port and airport, not least in the Australia TradeCoast (ATC) precinct.

World class transport infrastructure gives the ATC its comparative advantages over other industrial precincts.

Almost 38% of all leased space (+2,000m2) in Brisbane during the period was taken up at the ATC. Demand for space in the ATC was reflected by the signing of almost 16,500m2 of space over five significant leases including tenancies signed IMT Food Services, Cement Australia, DB Schenker Freight Forwarding, Rentokil and Thales.

Adelaide

A bit like Melbourne writ small, Adelaide’s market has similar pressures but will be boosted by the arrival of Aldi, with a 30,000 sqm DC in Regency Park, and Costco, which has started construction on their 14,000 sqm purpose built facility at Kilburn which is due to complete in 2015.

"Demand for industrial space appears to have improved over the last six months with the level of enquiry and size of requirements improving over this time. Logistics and transport have been the key tenant type which has driven demand over the last 12 months.

This is a trend which is reflected across other industrial markets nationally and is supported in part to the significant increases in online retail. This is positive for the South Australian industrial market with this sector likely to remain a driver of demand over the medium term.

Perth

If there was one capital city that is definitely cooling off, it is Perth, with some businesses looking to sublease space,

The East sub-region is the focal point for much of the metropolitan areas transport and logistics sector, as well as housing a substantial fabrication and engineering sector. But space is held tightly and transactions and developments few.

Like ATN on Facebook

Follow ATN on Twitter

You can also follow our updates by joining our LinkedIn group or liking us on Facebook