Sydney's south-west is emerging as one of the most in-demand regions for industrial businesses, due to increasing residential re-development projects and rising rents pushing tenants out of South Sydney.
CBRE agent Chris Ryan said a significant shift in tenants moving out of South Sydney and along the M5 corridor has recently been identified.
"There is a declining supply of quality industrial properties in South Sydney as a result of increased residential conversions, which are shrinking the supply pool and prompting businesses to look at alternative locations.""The recent lease agreements in Riverwood Business Park demonstrates this trend as the businesses were originally looking for properties in South Sydney but committed to alternative locations due to a lack of appropriate sites," Mr Ryan said.
Areas such as Riverwood are gaining more traction in the leasing market due to the lower average rents and strategic positioning along the M5 Corridor.
"Riverwood is an established industrial precinct with the desirable positioning on the M5 motorway corridor in Sydney's south-west, 24km from the Sydney CBD and 12km from Port Botany."CBRE Industrial Manager Tom Rourke continued; "as the vacancy rates in Riverwood decline, we expect this shift to continue further out along the M5 corridor. Suburbs such as Padstow, Milperra, Condell Park and Moorebank are the next hotspots on the radar for industrial tenants."
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CBRE Research has further determined residential conversions are contributing to upward pressures on rents in South Sydney, with super prime net face rents increasing 2% and prime net face rents increasing 1.3% in quarter 1, 2015.
"By choosing tenancies out of South Sydney, tenants are not only capitalising on rental discounts of circa 20% net, but are also finding that the outgoings are halved - providing gross discounts of over 30%," said Mr Rourke.
"If the proposed M5 extension and Moorebank Intermodal goes ahead this may further encourage businesses to look at alternative areas out of South Sydney."