Sydney industrial market set to rebound in next 12 months: CBRE
Strengthening investor sentiment, increasing tenant demand and more favourable fiscal conditions are expected to position Sydney's industrial market for a rebound in the year ahead after 12 months of slow growth.
According to CBRE’s Australian Industrial MarketView report for the third quarter, despite a contraction in industrial employment over the past year, total imports - measured in 20 foot equivalent unit (TEU)- that came through the Port of Botany increased in July and August and over the 12 months to September rose 5.5%.
And while sentiment strengthened across the metropolitan industrial sector during the quarter, Sydney remained "one of the most in-demand" markets nationally.
CBRE Senior Director of NSW Industrial Jason Edge said “while investors remain attracted to long term lease covenants and lower risk adjusted returns, they are becoming more accepting of shorter lease terms assuming the core property fundamentals exist".
“As a result of this, the market is tightly held, with owners holding onto assets in hope that yields will tighten further.”
B-Grade warehouse yields remained steady at between 8.50% and 11.00%, while A-Grade warehouse yields tightened by 25 basis points to 7.50% and 10.50%, said the report.
Sydney industrial land values remained relatively steady over the quarter, with fully serviced 0.25ha lots averaging $580 per square metre and 1.6ha lots hovering at $448 per square metre.
CBRE is not expecting land values to experience any significant growth until a market shift occurs.
Specifically, CBRE senior research manager of industrial markets Luke Dixon said “capital value growth is unlikely until the availability of land declines or market demand changes".
Meanwhile, stronger construction levels over the quarter helped boost the industrial supply pipeline, with a total of 513,603 square metres due to for completion by the end of 2013, gaining pace in 2014 and 2015, the CBRE report said.
Rental growth remained flat over the quarter for prime and secondary grade stock.