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Limited space and strong demand will see a significant push to develop high-rise industrial warehouses in major cities across the next three years, major investors have said.
ASX-listed giants Goodman, Charter Hall, GPT and Centuria, among others, are leading the charge amid forecasts that 850,000 square metres of multistorey floor space will be delivered across 20 Sydney projects to about 2027. This is equal to about 15 per cent of the city’s new industrial stock.
In the August reporting season, chief executives of the companies all said that the industrial and logistics sector was a major engine of growth and they have a focus on getting land as close to the cities as possible to develop the vertical projects.
The Ascent Logistics Centre which Charter Hall is developing in Alexandria.
Demand for swift home delivery to eager consumers means the developers are seeking space close to the city, which is a premium in terms of price, usage – being mostly residential – and land availability.
In its latest report, CBRE’s Rise of Multi-storey Warehousing, forecast that about 30 per cent of the space is currently under construction or has development approval, with at least six multistorey warehouses expected to be delivered over the next two years.
While warehouses as high as 17 storeys have historically been developed in Asia’s densely populated cities, Sydney’s supply shortage is accelerating the development trend here.
Projects in the pipeline include Charter Hall’s 27,059 square metre Ascent on Bourke development in Alexandria, which is almost 100 per cent pre-committed with Schindler and Coles as the main tenants and due to be completed in about a year.
Goodman is developing sites in Alexandria, while Cabot’s 19,460 square metre property at Matraville is slated for completion in the second quarter of next year.
The private developer LOGOS is also starting work on the former Qantas flight training centre in St Peters.
CBRE’s Australian head of industrial and logistics research Sass J-Baleh said the drivers of multistorey warehouse development include limited industrial land, high land values in prime locations and heightened demand from e-commerce related occupiers.
“With tight supply conditions unlikely to ease in Sydney due to land constraints, multistorey warehousing is providing one means of delivering new floors pace to the market,” J-Baleh said.
South Sydney is attracting the lion’s share of multistorey industrial projects, given the market’s outsized land constraints and the growing occupier demand for last mile e-commerce distribution hubs. Other targeted areas are the inner south-west, central west and parts of North Sydney and Artarmon.
CBRE’s South Sydney managing director Nathan Egan said south Sydney is well positioned to accommodate multistorey warehouses as consumer delivery expectations heighten and occupiers focus on ways to decrease delivery costs.
Egan said with transportation accounting for 50 per cent of overall costs, “location is paramount”.
The CBRE research team have compared average rents from six precincts within the Asia Pacific where multistorey projects are the most prevalent, and found rents vary from $180 per square metre in Shunyi Airport, Beijing to $600 per square in Hong Kong.
“The south Sydney market average rent for super prime grade assets is currently in the mid-range of these precincts, at $325 per square metre,” J-Baleh said.
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