Developers go west for new industrial facilities

The development hiatus in western Sydney is officially over, with major projects totalling 556,043 square metres due to be completed this year in the outer south west, central west and north west markets, according to new research from CB Richard Ellis.

 

Construction activity all but ground to a halt during the Global Financial Crisis, as a result of constraints on bank finance and a clamp down on speculative development.

 

However, CBRE’s NSW industrial director Jason Edge said developers such as DEXUS, Australand and Goodman were now kick-starting a range of major projects in western Sydney to capitalise on renewed tenant demand.

 

“With over 150,000 square metres of current enquiry for facilities in the Erskine Park/Eastern Creek precinct, we expect a significant pick-up in new supply during 2011.”

 

“With the second half of 2010 showing positive signs with a strengthening in the industrial sector, we are now seeing developers return to the market in western Sydney,” Mr Edge said.

 

“Tenant demand continues to be from the retail sector as well as the 3PL providers looking to grow their footprint in this precinct.”

 

Indeed, CBRE’s latest forecasts are for industrial development to rebound to record levels by 2012 as market fundamentals continue to improve.

 

CBRE research analyst Gareth Dingle said just 137,626 square metres of industrial space was added to Sydney’s outer north-west sub-region in 2010, which is the lowest level on record for the sub-region.

 

Mr Dingle said CBRE’s forecasts were for supply levels to double in 2011, with 264,702 square metres of stock due to come on stream. That momentum will continue into 2012 when 584,096 square metres of stock likely to complete in the outer north west sub-region.

 

“It is likely that as consumer sentiment increases, more large retailers and distributors will be searching for new buildings in the sub region,” Mr Dingle said.

 

Mr Edge said western Sydney was capturing the lion’s share of tenant enquiry for new industrial space, given the availability of sites and the area’s road infrastructure network that catered for both the line haulage and metropolitan needs of occupants.

 

CBRE’s review highlights a series of major projects that are either underway or about to commence, including a new 82,000 square metre distribution centre for Metcash, a 50,000 facility for Kmart, a new Best and Less centre totalling 36,000 square metres and a facility for Cassons totalling 17,000 square metres.

 

DEXUS is also moving to capitalise on increased tenant demand with the construction of a 21,000 square metre office warehouse facility on a newly-acquired site at Erskine Park. Construction will commence in the coming weeks.

 

Mr Edge said the facility had been designed to accommodate the changing requirements of industrial tenants and the increased need for provisions such as recessed docks and large truck manoeuvring areas.

 

CBRE’s review shows that the increased tenant and developer activity is already translating to a recovery in industrial land values, with the value of fully serviced, 1.6 ha lots in the outer north-west increasing by 5.3% during 2010 to average $237 a square metre.

 

Five land sales over $1 million occurred in the second half of 2010, with the largest being the $15 million DEXUS acquisition in Erskine Park.

 

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