Sydney Still Among World's Most Expensive Industrial Markets

Online retail and the growth of e-commerce has underpinned surging demand in the logistics real estate market, with some of the largest industrial leases signed this year being taken out by e-commerce companies.

Industrial real estate is now the most common type of commercial transaction across Australia.

And according to CBRE's 2018 Global Industrial & Logistics Prime Rents report, Sydney is the world's tenth most expensive city for industrial leasing.

Major hubs in China, Australia and New Zealand topped the list of growth markets, where improving economic conditions, positive demographic trends, soaring construction costs and land scarcity have put upward pressure on prime rents.

“Several factors have caused this growth acceleration: rising demand from e-commerce users, soaring construction costs, labor shortages and wage inflation,” the report said.

The construction sector helped drive strong demand in Australia’s industrial economy, with the gross value of construction rising by 4.9 per cent last year, fuelled by high levels of infrastructure spending.

Related: What Are the Driving Forces Behind the Industrial Real Estate Boom?

CityAUD $ per square feet per annual basis
1Hong Kong$41.55
Top market rent was gathered based on industrial distribution space of the highest quality and specification, and in the best location within each industrial hub.
Top Industrial MarketsImage: CBRE

Melbourne, which has the highest population growth rate in Australia, ranked as the 12th strongest industrial city globally with an increased demand for goods resulting in increased demand for logistics space.

The Victorian capital currently contains 28.9 per cent of the industrial builds across Australia (181 projects), 75 per cent of which were warehouses or distribution centres.

Adelaide also featured strongly ranking as the 17th strongest of the 71 cities surveyed.

In Auckland, soaring construction costs (8% per annum in the past five years) and a flight to quality logistics facilities has driven prime rent growth.

Globally, the Canadian city of Vancouver led rental growth with a 29.1 per cent increase for the year to $10.16 square feet.

Hong Kong retained its status as the world’s most expensive place to operate, with rents of $41.55 per square feet.

In Sydney, the growth in online sales has underpinned the industrial property sector for some time and with demand for e-commerce on an upward trajectory.

Global retail titan Amazon recently announced plans for a new 43,000sq m distribution centre in Moorebank, Sydney.

The new Sydney distribution centre allows Amazon to fast track current and future customer demand and speed up delivery to customers across the country.

Earlier this year, Logos acquired a massive 4.4-hectare warehouse site in Sydney’s south for $72.4 million in an off-market sale.

Fund manager Charter Hall also snapped up an industrial asset in Sydney’s south-west for $90.5 million, strengthening its push into Sydney’s tightly-held industrial and logistics market.

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