Returning confidence tightens Sydney industrial markets
April 19, 2012
Institutional industrial land owners who have taken advantage of the lack of large Prime Grade industrial space available in the market are being rewarded for their bold move with 80 per cent of speculatively built stock in Sydney now leased, a Colliers International report has shown.
Gavin Bishop, Colliers International National Director of Industrial, said a Mascot site in Sydney’s south had been seeking a pre-lease for the past two years and there are now numerous interested parties looking to lease the proposed new development.
The largest of these pre-commitments was for Dexus, with 21,000sq m leased to DB Schenker at Lenore Lane in Erskine Park, at a believed to be more than $105/sq m with a lease term of seven years.
“Overall the leasing market continues to experience moderate levels of demand and enquiry which has led to a stabilisation of rents and incentives for both Prime and Secondary Grade stock,” he said.
Mathew Tiller, Colliers International Research Manager, says Prime Grade rents are ranging from $105/sq m in the Sydney’s south west to peak at $185/sq m in the north. Incentives have showed signs of tightening in some markets with Prime Grade incentives averaging between eight per cent and 10 per cent across Sydney.
Secondary rents range from $75/sq m in the south west to $150/sq m in the north.
The Colliers International NSW Industrial team has had an extremely strong first quarter having leased more than 60,000sq m of space in existing buildings (above 3,000sq m).
“In the market, the volume of leases (above 2,000sq m) is up 43 per cent from 34 in Q4-10 and Q1-11 to 52 in Q4-11 and Q1-12, which is a sign that small and medium businesses have started to commit to making decision about future growth and the operations of their businesses,” he said.
“These businesses are making property decisions far quicker than what they were 12 months ago.
On a sales front, the recently completed development at 51 Bourke Road in Alexandria is now more than 90 per cent sold. The demand for this project has seen the same developer, Trueman Corp, begin construction on a similar spec project at nearby 91 Fitzroy Street, Marrickville which will comprise 15 industrial units and 64 storage units.
“The Sydney industrial sales market is expected to see moderate levels of demand continue from owner occupiers over the remainder of 2012. Functional, well designed and correctly priced properties are receiving strong demand from owner occupiers and private investors,” Mr Bishop said.
“The ongoing lack of Prime Grade investment stock on the market for sale will lead to a tightening in yields for the balance of 2012 due to the strong demand for this type of product.
“A number of the A-REITS will continue to sell their secondary product to recycle capital back into the development arm of their businesses to fund the construction of spec projects, particularly in Sydney’s central west.
“Goodman, Australand and Dexus have decided to spec about another 90,000sq m of Prime Grade product for lease in Greystanes, Eastern Creek and Erskine Park which will be completed by the end of the year, and we’re confident this will be absorbed due to the improving leasing market.”
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