It is interesting times for Sydney Industrial property in 2016 as we see demand for prime industrial properties relatively strong along with a diminishing supply of serviced and industrial zoned land.
With South Sydney and parts of inner and central Sydney areas continue to be rezoned and redeveloped to cater for mixed use development, more tenants are being forced to make locational and operational decisions around their warehouse property requirements.
Whilst staying in inner and central areas and competing in a shrinking industrial market is the only consideration for some, more companies have migrated to the outer west to achieve cost effective and operational suitable facilities.
With new development and prime grade leasing activity being relatively strong in key outer west suburbs over the last 3 years and only limited new industrial zoned and serviced land entering the market at the same time, it has become more challenging for companies to find the right property. The market is currently fielding some significant requirements for large warehouse D&C facilities (i.e. 25,000m2 plus) and it is said at this time there are only a handful of land opportunities that could meet these building requirements.
The limited prime grade facilities and suitable land is also having an impact on companies seeking prime grade warehouse facilities in the 3,000m2 – 6,000m2 size range, especially in the M4 and M7 corridor. Development in the outer west area can focus on facilities greater than 10,000m2 and supply below 6,000m2 can be limited and tightly held either with tenants or owner occupiers. We have recently experienced this lack of supply with some clients and situations where companies have had to move quickly to secure buildings, often competing with multiple parties. In some instances landlords who have undertaken some developments under 10,000m2on a speculative basis have been able to lease these prior to construction being completed.
There are still opportunities in the market but it may be another 2 years before we see more significant parcels of serviced and zoned industrial land become available. It is important for companies to invest in completing strategic reviews of their industrial property, including timing and cost considerations, for their next property lease. Companies should:
- Understand current availability and future stock levels in current or future locations and how this will impact on their timing.
- Start discussions early with landlords should they wish to remain in existing premises and put in place strategy to achieve the most cost effective outcome for their business
- Assess whether the existing premises can be reconfigured to allow an extended period for the short to medium term
- Get internal pre approvals, included expected capital costs, before going to the market looking for new space
- Depending on size and requirements start looking at your lease requirements 1 – 2 years from existing lease expiry
Luke Stafford is the Director of Symmetry Partners, an independent corporate property advisory company who represents and advises occupiers of commercial and industrial property throughout Australia.