Sydney industrial market driven by lacking supply: HTW Industrial
In general terms, the Sydney industrial property market performed strongly in 2019 and it will be the most exciting market to watch in 2020, according to the February report from valuation firm Herron Todd White.
The property valuation firm found a notable increase in demand in Sydney’s industrial market over 2019 with tenants and owner-occupiers alike experiencing difficulty finding well located, good quality industrial space, a trend we expect to continue in 2020.
Demand continues to be driven by lack of supply that has been influenced by residential infill re-zonings in traditional industrial precincts close to the Sydney CBD, airport and ports.
The increase in demand for imported goods and the need for transport and logistics centres have also contributed to the strong increase in demand for warehousing space. As a result, well-located industrial precincts with good connectivity to major transport routes and ease of access to regional business centres including Liverpool, Campbelltown, Parramatta, Blacktown and Penrith will continue to perform well this year.
Such precincts include Wetherill Park, Silverwater, Bankstown and Moorebank, all of which are well placed for access to key transport routes.
HTW valuers said, "we saw yield compression across most industrial precincts in 2019 and we expect this to stabilise somewhat in 2020 with most areas showing relatively low yield rates, currently generally sitting between 4% and 7%."
"We expect that in some areas it is possible that these yields will continue to tighten, but more generally we are expecting stability."
"Average rents across most industrial markets in Sydney grew in 2019, particularly in well located precincts that offer ease of access, transport or proximity to the CBD and ports. We expect that this upward trend will continue in 2020.
"A continued lack of land supply will see premiums paid for vacant land and under improved sites. in some areas we have noted the return of developers undertaking industrial developments and some smaller unit developments being undertaken by local land owners."
They said they will be closely watching the Western Sydney Aerotropolis.
HTW forecast that 2020 will provide some great opportunities in the market, however the challenge will be supply, which may make finding the right property difficult.
Investors looking for returns will struggle at the lower end of the market, however some opportunity for returns and longer-term growth exist at the higher end of the market (say above $5 million), they concluded.
