The world’s largest commercial real estate services and investment firm, CBRE, says Sydney’s industrial sector is experiencing an influx of new stock as developers launch speculative development projects to capitalise on the city’s strong market conditions.

According to CBRE’s Q3 Industrial and Logistics MarketView report, the amount of new industrial stock added to Sydney’s industrial market in the last quarter was 80% higher than the previous corresponding period, with around 193,000sqm added.

CBRE’s Kate Bailey, Head of Logistics and Retail Research, said the trend continues to have a significant impact and is helping to drive land values up in core areas.

“With vacancy at cyclical lows across the majority of submarkets, we are seeing increased levels of speculative stock as developers look to capitalise on strong market conditions,” she said. 

The report also reveals that average size of industrial deals has risen significantly as investment opportunities in the Sydney industrial and logistics market are limited.

“In Q3 2018, industrial sales volumes across greater Sydney totalled $646 million across 23 deals (all above $5 million),” Ms Bailey said.

“Whilst total investment volumes rose 8% from the previous corresponding period’s $600 million, the limited number of deals saw the average deal size rise 45% to $28.1 million.”

CBRE’s Jason Edge, Senior Director of Capital Markets, Industrial & Logistics, said the scarcity of property for sale was generating strong demand for available assets. For instance, the sale of 488 Victoria Street, Wetherill Park and 16 Lockwood Road, Erskine Park demonstrate the underlying growth in industrial land and capital values over the past 12–18 months.

“488 Victoria St Wetherill Park was last sold in Q2 2017 for $15.5 million ($1,762 per square metre), but was re-sold in Q3 2018 for $18.1 million ($2,061 per square metre), demonstrating a capital value growth of 17%,” Mr Edge said.

“Similarly, the vacant 1.4ha land parcel at 16 Lockwood Road was re-sold in Q3 2018 for $10.1 million ($712 per square metre), nearly doubling in value after being purchased 18 months earlier.”

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