Sydney is expected to remain an undersupplied industrial market in the short term, despite the recent rezoning of a significant chunk of land in Western Sydney, exacerbated by a high provision of private and government land ownership.
Colliers International’s Western Sydney Industrial Development Update states that despite the recent rezoning of the Mamre Road Precinct which has boosted supply levels by 850 ha (gross), this land will not be developed in the short term given the need for servicing and upgraded road infrastructure.
The report states that the Western Sydney industrial market has 1,868 ha of undeveloped industrial land, representing 17 per cent of all zoned industrial land, down from 23 per cent in 2016.
“While 1,868 ha of land may seem significant, land opportunities in the short term are relatively limited, hampered in part by a lack of serviced land and several large land holdings held by privates or government departments,” said David Hall, National Director, Industrial at Colliers International.
Luke Crawford, Associate Director, Research at Colliers International said the rezoning of the Mamre Road Precinct is good news for the local industrial market with severe land shortages becoming apparent over the past two years. However, development of the Precinct will be led by the delivery of infrastructure and services and given the lead times involved with servicing, an undersupplied market will remain, particularly within the next three years.
“From a land value perspective, the current rates for industrial land are expected to be maintained, underpinned by the outlook that industrial yields will remain firm given the favourable tailwinds impacting the sector,” he said.
“Also contributing to the outlook of continued land shortages is the sharp rebound in the leasing market with approximately 950,000 sqm in current briefs within the market in Western Sydney, up from sub 500,000 sqm at the depths of COVID-19. 42 per cent of these occupiers are seeking design and construct solutions via the pre-commitment market.”
David said that of the 1,868 ha of undeveloped industrial land in Western Sydney, only 313 ha of the total is currently available for immediate development.
“This represents approximately two years of supply on current take-up rates,” he said.
“Further constraining future supply, almost 60 per cent of the 1,868 ha of rezoned land is currently held by privates or government departments. The recently rezoned Mamre Road Precinct is no different with 53 per cent of land within the Precinct being owned by private groups, while institutions represent just 41% of the Precinct’s ownership structure.”