Sydney industrial land values see 15% growth in 5 years: HTW Industrial

The Sydney metropolitan industrial market remains an attractive home for capital with investors chasing yields and potential for capital growth, according to the latest report from valuation firm Herron Todd White.

The property valuation firm found, the effects of this current demand are partly driven by a lack of available supply. Demand remains strong across most sectors of the market, from entry level to large scale assets.

In the second quarter of 2019, approximately 70,000 square metres of industrial supply was added which is 46 per cent below the approximate 130,000 square metres added in the same quarter of 2018.

Industrial land values have grown at a reported 14 per cent annually over the past five years.

The HTW valuers said, "indeed, the New South Wales Valuer General has recently undertaken land valuations across the state that resulted in significant growth in industrial land values, with industrial land showing the strongest overall increase amongst all uses. The average industrial statutory land value increased by 17.5 per cent."

"Notable local government areas that have seen increasing land values include Cumberland and Blacktown."

"The lack of land supply and increased demand for smaller assets has led to the development of a number of multi-unit strata developments, including Primewest’s estate project, Interlink Strathfield at Enfield and a three level, multi-storey, 44 industrial unit plus 90 storage unit development at Revesby, known as The Mavis Quad in Sydney’s South."

"The upshot of the lack of supply and rising values is a further tightening of yields which we expect to be at or close to the firm end of the current cycle, with entry level stock often sitting at sub five per cent, particularly with respect to owner-occupier markets where owners place less reliance on yields and cash flow as properties are purchased for their own usage," they added.

As a result, the achieved market yields for properties sold with vacant possession tend to be lower than those associated with investment sales.

Large format industrial yields are currently sitting in the general range of six to seven per cent.

The valiers stated, another factor that has contributed to growth in the Sydney industrial market is the ongoing upgrades to transport networks that will serve to better connect industrial precincts across Sydney, particularly with respect to western Sydney.

Current projects include WestConnex, Western Sydney Airport at Badgerys Creek, Pacific Highway upgrade, NorthConnex and the Northern Road upgrade.

A further $50 billion has been committed to various future projects, HTW noted.