South Sydney sheds are raising the roof
The scarcity of space and soaring land costs and rent have led industrial property owners to reach for the sky – literally – as they construct multi-level warehouses.
Linking in with the arrival of Amazon and the promise of same-day deliveries, industrial property is at the core of providing the infrastructure for “last mile delivery”.
Small, vertical distribution centres dominate the skylines in densely populated Asian cities, but now the trend is gaining momentum, particularly in the tightly held South Sydney precincts of Botany and Alexandria, according to Colliers International.
Goodman chief executive Greg Goodman said he expected more multi-level industrial property developments to be constructed across Australia, triggered by the growth in online shopping.
“The e-commerce sector can only increase and development of high rise warehouses will become very popular,” Mr Goodman said at the full-year results.
“We see multi-level warehousing is in tune with the e-commerce market such as have developed in Beijing, Shanghai and Hong Kong and there are opportunities for these sites in Australia.”
In the third and final component of Colliers International Spotlight on South Sydney research series, by Sass J-Baleh, it says the diminishing industrial land supply, coupled with soaring land values and rents has resulted in a strong take up of smaller industrial units which encompass co-located and ancillary office space.
The report says this increase in multi-level industrial units is a strategy to maximise limited floor space ratios and increase market values for industrial property.
Malcom Tyson, managing director of industrial at Colliers International, said the unprecedented level of development in Australia’s east coast cities was having a significant impact on industrial property.
“The residential and commercial property nature of the inner South Sydney corridor is increasingly characterised as high-density developments, which could provide scope for the development of high-density warehouses and manufacturing facilities in the future.”
Ms J-Baleh, research manager at Colliers International, said that although this trend was just beginning in South Sydney, it was common in high-density cities overseas.
“The supply of multi-level warehousing has only just begun to emerge within the South Sydney industrial market; however multi-level warehousing and high density buildings have been developed overseas, most prominently in the cities of Hong Kong and Singapore,” Ms J-Baleh said.
“The inner South Sydney market draws parallels to these cities in that there is an extremely limited supply of developable land, and therefore there are greater pressures to develop multi-level, rather than single warehouses.”
Ms J-Baleh said given that the population growth and, in turn, the growing need for housing (where people want to live) will continue to grow, the value of industrial land will continue to rise at above average growth rates. In this context, multi-level warehousing will increasingly become a viable and optimal industrial development opportunity.
“Strong take-up for these smaller industrial units (encompassing co-located warehouse and ancillary office space) has been observed in the South Sydney market, with demand from a mix of users, and increasingly from creative users, such as IT, media, and retail sectors, that have relocated from city locations to Surry Hills, Pyrmont, and the City, due to rental premiums.”