Value For Sydney's Industrial Land Surges from eCommerce Demand

A dwindling supply of industrial land has pushed industrial land values up to record rates.

According to an ongoing report from Colliers International, land values currently average $1,850 per square metre – just over double the Sydney average of $852 per square metre – equating to 24 per cent annual average growth over the past two years.

The Spotlight on South Sydney report said that multi-level industrial warehouses are becoming the preferred industrial property type in the region. South Sydney land values have jumped 24 per cent in the last two years.

Colliers has called it the “last half hour delivery”, where industrial properties are repositioned in the market place to accommodate a component of last mile (e.g. eCommerce) type uses, which will continue to be in strong demand as precincts that lie within the inner south corridor benefit from proximity to the strategic transport gateways of Sydney Airport and Port Botany, as well as a large concentration of Sydney’s Metropolitan population.

The share of industrial zoned land located within Sydney’s South market equates to approximately 13 per cent (or 1,755 hectares) of the Sydney Metropolitan Area.

As more sites are identified and realised for higher and better use (predominantly accommodating high density residential and commercial developments) there may be scope in the future for high-density industrial buildings.

There has been a focus on Sydney fringe markets from the likes of Goodman, Dexus and other private industrial developers to establish distribution ports for the ever-increasing online shopping industry.

According to The Age, “[T]enants for the sites are generally the third-party logistics sector, such as FedEx, DHL and Australia Post, as they physically have to deliver the products across the Sydney metropolitan area and need to be near transport and inner-city suburbs,”

“Industrial property in Sydney's inner south will continue to be in strong demand, particularly due to their proximity to transport gateways and major population centres.”

Colliers’ report said the Inner South and other markets in Sydney’s inner ring, are expected to become the hub of last mile delivery as rising land values will force developers to expand upwards, in order to allow 3PL and eCommerce users to provide cost-effective delivery solutions for Australian consumers.