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Industrial Land Supply In The Spotlight: Research

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The supply demand ratio of industrial land is shifting according to Colliers International Research from findings from its Industrial Research and Forecast Report for H1 2017.

On the east coast, Melbourne and Sydney in particular, the housing boom has brought an intense focus on the supply of residential. A large proportion of this has been through urban regeneration, the change of zoning from industrial to residential. The inner parts of Sydney and Melbourne have, as you would expect, been the focal points of this rezoning. The resulting loss of these industrial lands has resulted in the trend which, while in some cases started 5 years ago, now has really started to impact directly on the industrial land availability in these markets. An estimated relocation of approximately 100,000sqm p.a. will take place over the next 5 years. This demand will be joined by the estimated 150ha – 250 ha of land required per annum to meet the needs of a growing population, as well as catering for the massive infrastructure spend that is being played out.


Extrapolating this demand out for a 10 year period starts to bring a focus on to the available land that is either ready for industrial development, or has the potential for industrial development subject to zoning and servicing. In a market such as Sydney, which is, by virtue of the geographic constraints, effectively a land constrained market.

“Competition is increasing for development land between the property institution looking for long term industrial investment property, and the industrial business looking to own their own premises, which has lifted prices by over 25% in the last 24 months,” said Malcom Tyson, Managing Director, Industrial, Colliers International.

“Any large land parcels that are suitable for major industrial estates will be chased hard in 2017.”

“Government policy and planning decisions obviously have a major impact on future supply, however based on a current supply and demand analysis we forecast that there is between 6 to 10 years of industrial supply left in the Sydney market,” said Sass J-Baleh, Research Manager, Colliers International.

The Colliers International Industrial Research and Forecast Report for H1 2017 found in 2016 around $4.5 billion of industrial sales occurred nationally, which is above the five-year average of $4.3 billion. Yields compressed in each of the eastern seaboard capital cities between H2 2015 and H2 2016.

“Against a backdrop of decreasing asset volumes coming to market and rises in offshore and domestic interest for industrial assets, it is likely we will see further cap rate compression during the year, particularly for secondary grade stock in Sydney and Melbourne,” said Anthony Mylott, National Director, Industrial Valuation, Colliers International.

“Demand drivers will continue to concentrate on the infrastructure boom, precincts well serviced by transport connections, areas of high tenant retention and labour market improvements.”

As institutional investors continue to expand their ownership of industrial assets (particularly within the logistics sector), the availability of assets for sale has diminished. Limited property portfolios are expected to reach the market in 2017, raising the competitiveness for purchasing assets.

The ownership of the investment grade industrial stock is still the least concentrated of the major asset classes of office, retail and industrial. 30% of investment grade industrial is owned by the top 8 players, with the balance of the ownership spread between corporate, private and emerging investment vehicles.

“Taking advantage of the current buoyancy in the investment market will be the corporate owner, who by the sale and leaseback of their premises will unlock and release capital that is tied up on their balance sheet,” said Mr Tyson.

“This trend of sale and lease back programs is anticipated to continue in to 2017, underpinned by the extensive capital mandates circulating through the Australian Industrial property market.”
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Sydney Industrial

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Article originally posted at: https://theurbandeveloper.com/articles/industrial-land-supply-research