The Western Sydney industrial and logistics market recorded its strongest year on record in 2021 as positive structural tailwinds and a large reweighting of capital towards the sector saw a record level of take-up and new pricing benchmarks set, especially in the industrial land sector.

Colliers latest Industrial Development Update found that a large number of institutions have shifted their mandates to a build-to-core strategy or are targeting infill locations that offer development upside in order for return hurdles to be met. This unprecedented level of demand has continued to place significant pressure on industrial land in Sydney’s Western submarkets.

“Industrial land availability has continued to decline off the back of record levels of occupier demand. At present, there are 1,805 hectares of net developable industrial land across the market which represents a decline of 9.5 per cent from mid-2021,” Colliers National Director for Industrial David Hall said.

“Demand has been extraordinary with over 260 hectares taken-up in 2021, which was almost double the levels recorded in 2020 and the long-term average. The take-up of land was strongest within the Kemps Creek and Eastern Creek precincts while the Mamre Road Precinct alone recorded take-up of more than 60 hectares in 2021”.

The report also shows that the availability of land that is able to deliver warehouse space will increase in 2023, with over 700 hectares becoming available.

The bulk of the increased availability in industrial land will stem from the Mamre Road Precinct, while other land parcels will become available within the Western Sydney Employment Area (WSEA), however much of this is owned by private landowners.

“In the short term, the availability of land for 2022 is limited with just over 220 hectares that could be developed, taking into consideration the ownership structure and other planning constraints. Demand well exceeded this in 2021 and as a result, further upward pressure on both land values and rents is expected,” Colliers Executive for Industrial Jock Tyson added.

“Take-up of land in 2022 is expected to remain significant, albeit constrained by the lack of availability in the short term. We expect take-up to again exceed 200 hectares for the year as both tenants source pre-commitments and developers progress ahead with speculative developments,” Colliers Director of Research Luke Crawford said.

As it stands, there is upwards of 280,000 sqm of speculative projects which will be brought to market in 2022. Rising construction costs are likely to dampen the level of speculative development to some extent as selected developers instead opt to source a pre-commitment.

The report noted that land values in Western Sydney are expected to rise further in 2022 with new pricing benchmarks expected to be set across both infill and greenfield sites.

“Yield compression is expected to have less of a bearing on land values with yields expected to stabilise in 2022, however, rental growth is expected to take its place and be the key driver behind further increases in land values,” Mr Hall said. “Whilst rising construction costs could place downward pressure on land values, this will be largely offset by the forecast rental growth across the Western Sydney market.”

For a copy of Colliers latest Industrial Development Update please contact either Colliers National Director for Industrial David Hall, Colliers Executive for Industrial Jock Tyson, or Colliers Director of Research Luke Crawford, via the below contact details.