Transport facilities being forced further out says Colliers
Rezoning pressure from residential sector means significant shift
The housing boom means industrial land, including for transport and logistics, is increasingly being forced towards the periphery of major cities, property firm Colliers warns.
Colliers notes the trend may have started five years ago but now impacting directly on the industrial land availability in Sydney and Melbourne.
"Competition is increasing for development land between the property institution looking for long term industrial investment property, and the industrial business looking to own their own premises, which has lifted prices by over 25 per cent in the last 24 months," Colliers International MD Industrial Malcom Tyson observes.
"Any large land parcels that are suitable for major industrial estates will be chased hard in 2017."
An estimated relocation of approximately 100,000 square metres a year is predicted to take place over the next five years.
This demand will be joined by the estimated 150-250 ha of land required per annum to meet the needs of a growing population, as well as catering for the massive infrastructure spend that is being played out.
"Government policy and planning decisions obviously have a major impact on future supply, however based on a current supply and demand analysis we forecast that there is between six to 10 years of industrial supply left in the Sydney market," research manager Sass J-Baleh says.
The Colliers International Industrial Research and Forecast Report for the first half of 2017 found that, in 2016, around $4.5 billion of industrial sales occurred nationally, which is above the five-year average of $4.3 billion.
The broad trends being observed within metropolitan Sydney – amplified over the past two years – has been the shift in preference for industrial users, particularly those large users within the manufacturing and logistics industry sector, to locate further west of Sydney, and the urban renewal of industrial zoned land in pockets of inner and middle ring areas.
The state government has established the Western Sydney Employment Area (WSEA) to provide businesses in the region with land for industry and employment, catering for transport and logistics, warehousing and commercial space.
Melbourne’s industrial market has continued to remain active, the report says.
Transport infrastructure projects, coupled with a favourable economic climate, such as record low interest rates and strong annual projected population growth rate to 2031 of around 2.2 per cent, has led to a number of large investment sales.
Over the past 12 months, Victoria recorded around $1.6 billion in industrial sales above $15 million, representing around 35 per cent of total national sales, well above the five-year average of $1.04 billion.
Colliers expects transport connections to industrial precincts in the city’s far north will continue to drive tenant growth, particularly with current construction of the CityLink Tulla Widening project, road upgrades, and new intermodal freight hub In Somerton, operated by DP World Australia.
"Rental growth in this sub market has accelerated with prime net face rents growing by 9.7 per cent and secondary rents by 42 per cent," it says.
"This is combined with falling incentives which has seen strong net effective rental growth over the last 12 months.
"There has been growing tenant demand, particularly from food logistics and packaging tenants."
The report notes that a sense of urgency has returned to the Brisbane industrial leasing market as options for occupiers become constrained as enquiry increases and the supply pipeline slows.
Much of the action has taken place on the Australian Trade Coast.
Demand over the period stemmed from a broad base of tenants including transport and logistics, retailing and manufacturing.
Several large and medium scale users across a variety of industry sectors took space including:
- Agility Project Logistics 5,930sqm at Pinkenba
- Deluxe Freight 6,329sqm at the Port of Brisbane
- BevChain 30,000sqm at Eagle Farm.
It also reports a good level of enquiry from tenants for industrial properties positioned in the southern end of the precinct near the Logan Motorway and also at the northern end of the precinct near the Acacia Ridge Rail Yards.
"Limited availability of stock in this area along with limited land opportunities for large scale facilities will place further pressure on yields for industrial property in this location over the coming year," it says.
"Colliers International is aware of several major owner occupier group’s actively seeking prime grade industrial property and or land opportunities within this precinct."