Sydney industrial market in a 'holding pattern': Herron Todd White

ACT’s industrial market is set to improve in the long term and could be a good place for investment, according to valuer Herron Todd White. 

According to its Canberra valuation team, the ACT offers “some good opportunities to invest for the long term with the industrial demand likely to improve over time as the economy responds to increased population growth”. 

Investors looking for accelerated returns might consider bulky goods stores and showrooms in the industrial suburb of Fyshwick, the report says, as demand remains high and rental growth is likely to outperform neighbouring light industrial suburbs of Mitchell and Hume over the coming 18 months. 

The report says that unlike other capital city industrial markets, the ACT industrial market is “comparatively stable with demand restricted to those businesses that provide direct services to the ACT population”. 

However, there are some weaknesses in the market, with valuers noting that a decrease in construction within the ACT over the past 12 months has a flow-on effect in reduced demand or floor space to store building and construction materials. 

“While an exact figure is difficult to obtain due to the lack of leasing transactions, we estimate that rents have fallen by up to 7% in some markets.”

Overall, the general sentiment about the Sydney industrial market remains gloomy, with property owners in a “holding pattern”. 

But latest report does suggests investors consider strata industrial units in south Sydney or Artarmon, where the rental growth outlook is more positive than other Sydney markets.

Another exception to the otherwise lacklustre Sydney market has been the upper end of the market, where there has been a “flurry of activity” with several large firms including Big W, Volkswagen and Dick Smith pre-committing to new facilities, spurring new development in central and western Sydney. 

“The sale of the St Leonards Corporate Centre for $86.7 million and the rumoured sale of Sir Joseph Banks Corporate Park in Botany for $78 million has restored some faith at the top end of the market,” the report notes. 

Investors should steer clear of the lower end of the market where rental growth has been constrained. 

“Discussions with industrial agents across Sydney reveal that sales to investors have been minimal in the first half of 2011, with several industrial strata unit projects completed in the past two years remaining unsold,” Herron Todd White’s Sydney valuers have observed.