According to CBRE, more than 350,000 sqms of multi-storey warehouse space is expected to be developed in Sydney over the next five years as availability of zoned land shrinks.
The Rise of Multi-Storey Warehousing report from the real estate and investment firm says there are 14 notable multi-storey projects in the pipeline for Australia’s largest city, including a 172,702 sqms LOGOS development at Masco due to open in late 2026.
CBRE says other significant projects include a 51,664 sqms, three-level Goodman warehouse in St Peters, which is expected to be ready in the first quarter of 2024.
“With vacancy close to zero per cent, rents skyrocketing northwards, and land prices doing the same, multi-storey has never made more sense in Sydney than it does right now,” Cameron Grier, CBRE Regional Director, Industrial & Logistics, says.
“That said, developers still need to ensure design functionality to ensure these developments are fit for purpose for the Australian market,” he adds.
The report also notes the significant influence that high land values, low vacancy rates and minimal new land supply is having on the Sydney industrial and logistics market, where vacancy has hit an all-time low of 0.4 per cent – the tightest in the country.
CBRE says the average super prime net face rent is expected to maintain double-digit annual growth between 2022-2026 with rents above 12 per cent per annum expected to occur in South Sydney whose market accounts for 80 per cent of the city’s multi-storey projects.
“Cities such as Hong Kong, Shanghai and Tokyo have built vertical warehouses in order to keep up with occupier demand for precincts with extremely limited space available,” Sass J-Baleh, CBRE’s Head of Industrial & Logistics Research, says.
“Sydney is following that trend, with dwindling industrial land supply in precincts that are becoming more sought after as ‘last mile’ distribution hubs due to recent and forecast growth in e-commerce,” she adds.
“This is particularly the case in South Sydney, which has strong access to the Port of Botany, airport, and the CBD but accounts for only 2.5 per cent of Sydney’s total supply of undeveloped zoned land.”
The CBRE report states that South Sydney has the highest land values in the country, averaging $2850/sqms for 1.6 ha lots, which the company says is justifying multi-storey construction costs.
It adds that South Sydney also has the highest rents in the country, averaging $225/sqms for super prime grade assets.
“As the Sydney market continues to experience unprecedented levels of growth, we expect multi-storey facilities will become an intrinsic part of Sydney’s industrial landscape,” Sass says.
“The significant increase in construction costs associated with multi-storey warehouses are offset in precincts such as South Sydney, given land availability and the desire to be located close to the consumer to minimise supply chain costs as e-commerce accelerates,” she adds.
“As land values appreciate across the city, we also expect to see an increase in multi-storey warehousing in outer precincts such as the Outer North West and the Outer South West in the medium to long term.”
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