Sydney's industrial construction to triple in next year with Eastern Creek fillip: CBRE

The amount of industrial space under construction in Sydney is expected to triple in both 2011 and 2012, according to research by CBRE. 

About 360,000 square metres of industrial space was completed in in Sydney in 2010, but an annual average of 1.2 million square metres will be built in 2011 and 2012 annually, according to CBRE’s latest Sydney industrial market report. 

Recovery in the Sydney industrial market and demand for space from large retailers and third-party logistics providers is encouraging developers including Dexus, Australand and Goodman to undertake speculative projects. 

More than half (720,000 square metres) of the speculative development will take place in the outer northwest of the city near Eastern Creek

Significant projects near Eastern Creek due to be completed over 2011-12 include distribution centres for Kmart (51,569 square metres), Ingram Micro (38,618 square metres) and Metcash (80,000 square metres). 

CBRE is forecasting that net face rents in Sydney will grow by 2.4% over the full 2011 year and by a further 3.1% in 2012, with incentives beginning to decline and tenant demand on the rise. 

“An abundance of new supply is forecast as developers and investors capitalise on the industrial supply shortage across metropolitan Sydney,” says CBRE research analyst Gareth Dingle. 

“Approximately 89% of the new supply due to complete in 2012 will take place in the outer west, underpinned by demand from large retailers and third-party logistics providers.” 

CBRE regional director of industrial, logistics and investments Joshua Charles says key infrastructure continued to be the main driver of demand for industrial property throughout Sydney. 

“As occupiers look to cut costs along their supply chains, infrastructure is a critical consideration and this is driving demand in markets such as the Outer North West where 723,468 square metres of space is due to be completed in 2012 – the highest level on record,” he says. 

“The continued recovery of the industrial market is expected to be slow but sure over the coming years and will be fuelled by increasing container throughput at Port Botany and projected positive growth in industrial production.” 

Other forecasts: 

  • stronger year ahead for Sydney’s north, with new construction expected to increase from just 5,000 square metres last year to over 42,000 square metres in 2011.
  • In the central west, new supply remains subdued however demand is expected to be bolstered by the completion of the Enfield Intermodal Logistics Centre.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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