Outlook strong for entry-level industrial market in Sydney: HTW
Despite the rising market and strong demand, parts of Sydney are still available to first time industrial property investors, according to valuation firm Herron Todd White’s May update on the industrial market.
In the western Sydney property landscape, the suburbs surrounding the CBDs of Liverpool (Chipping Norton, Prestons, Moorebank), Campbelltown (Minto, Ingleburn, Leumeah, Smeaton Grange and Narellan), Blacktown (including Kings Park) and Penrith (Kingswood, Jamisontown, South Penrith) offer affordable entry-level industrial properties, which appear to be picking up momentum in line with the urban sprawl, say HTW.
More specifically, in the south west region of Sydney the industrial markets appear to be experiencing buoyant conditions as the increase in population through large low-density residential land subdivisions (Middleton Grange, Edmondson Park, Leppington, Oran Park, Gregory Hills, Emerald Hills and Claymore) as well as the confirmation of the Badgerys Creek airport, amplify the need for jobs and further businesses in this locale.
“An entry point industrial investment in one of these locales could expect to achieve a positive level of capital growth and sustained demand due to the permanency of the surrounding large scale infrastructure projects and developments,” says the HTW note.
However, as demand strengthens so will the purchasing competition reflecting further yield compression and premiums paid in order to secure these investments.
“We consider that given the historically low interest rate environment which is likely to continue throughout 2017 and into 2018, the rental and capital value growth outlook for the entry level industrial market in metropolitan Sydney over the short to medium term is steady to strong, notwithstanding inevitable variances due to geographical factors related to access and connectivity to the wider Sydney metro area and beyond, infrastructure (both existing, proposed and under construction) and supply and demand factors.”
In essence, the rental market is expected to be shored up by a lack of supply together with a relatively healthy industrial outlook over the coming months and years, assuming the cost of energy does not continue to spike which may result in a shift in industrial activity to cheaper local, national and international locations.
Whilst it remains cost equivalent or even cost effective to buy and own your own industrial premises compared to the cost of renting, the market for entry level industrial property Sydney wide is set fair for a period yet.