The transport and storage sector (37%) has accounted for
the major share of occupier take-up in Sydney since 2013
(Figure 5). Wholesale trade (13%) and retail trade (15%) have
accounted for a further 28% of take-up combined, followed
by the manufacturing sector with 24%.
Rents
1
Figure 6 shows that existing prime net rents in the Outer
Central West of Sydney have increased by 1.1% p.a. in the
10 years to December 2015. Growth in the last five years has
been stronger at 2.0% p.a. Meanwhile, prime rents in the
Outer North West have increased 0.6% p.a. and 1.8% p.a. in
the last 10 and 5 years respectively.
Figure 6: Sydney prime grade net rents
Increased occupier activity in the Outer West precincts and
a diminishing stock base in the Inner West and South are
expected to support rents over the short term. Over the next
five years, prime grade net rents are expected to grow 2.1%
p.a. in the Outer Central West.
Outlook – Fundamentals
Demand for prime grade space is expected to remain
relatively strong, driven by organic growth, lease expiry, the
consolidation of operations and new 3PL contracts. Strong
activity recorded in the new build market in 2015 signified
the demand for prime industrial space, which is expected to
continue over the next 12-24 months. Occupier demand for
secondary space is expected to be supported by the ongoing
withdrawal of older stock for residential development in
urban activation precincts.
The supply pipeline over the next two years has been
enhanced by occupiers committing to purpose built
facilities. Developers have a number of new or extended
estates for 2016, expanding the variety of participants in the
development market.
Infrastructure projects will also have a significant impact on
Sydney’s industrial precincts. The WestConnex motorway
will provide increased connectivity to the port for existing
occupiers in the outer west via this major arterial road upgrade.
Outlook – Investment
Strong investment activity is expected to continue into 2016 in
Sydney as current investor demand outweighs the investment
opportunities. Sydney is the largest market in Australia and a
large number of investors continue to seek assets in the Sydney
industrial market, particularly domestic fund managers that
retain underweight allocations to the Sydney market. Sydney
properties are also highly sought after by offshore groups and
offshore mandates through third parties.
Source: JLL Research
* As at Q4/2015
75
100
125
150
175
Prime grade existing
net face rents $/sqm p.a.
Dec-05
Dec-10
Dec-14
Dec-08
Dec-12
Dec-16
Dec-19
Dec-07
Dec-11
Dec-15
Dec-18
Dec-09
Dec-13
Dec-17
Dec-20
Inner West
Outer Central West
Outer North West
Outer South West
South Sydney
Forecast
Dec-06
1 JLL Research produces an average net rent for each industry market. The rents quoted in this report do not account for tenant incentives. Leave incentives
are typically expressed as a percentage of the net rent and generally average around 10% for existing buildings. Industrial lease incentives are typically taken
as rent free periods.
.85
A-REIT ANNUAL REPORT
2015/2016
