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  • A shortage of industrial land supply in the inner city, combined with growing ecommerce demand, will force a market shift, a CBRE report says
  • Consumer spending habits shifting online will drive a need for 720,000sqm of additional Sydney logistics space over the next four years
  • Just five per cent of Sydney’s industrial zoned land is now undeveloped and serviced, amounting to only 605ha of prospective supply
  • According to the CBRE study, Sydney land absorption has averaged 137ha per year over the last decade, while leasing activity has averaged 805,000sqm

A shortage of industrial land supply in the inner city, combined with growing ecommerce demand, will force a market shift, according to CBRE’s latest Sydney Industrial & Logistics Land Supply study.

The report said consumer spending habits moving online would drive a need for 720,000sqm of additional Sydney logistics space over the next four years, with that space dedicated to supporting e-commerce sales.

Report author Sass J-Baleh, CBRE’s Australia head of Industrial & Logistics Research, said prior to 2020, retail inventory sales ratio had been trending down for 30 years, reflecting a ‘just in time’ model.

“Global supply chain disruptions have highlighted the need for retailers, particularly those using an online sales platform, to hold more inventory to minimise fulfillment delays, which is driving greater demand for industrial and logistics (I&L) space,” she said.

“Rising inventory requirements due to the expansion of the ecommerce sector is a trend we have observed in the US since 2012, and we expect this to be replicated in Australia over the coming years.”

These growing needs are driving capital and rental value development in Sydney’s industrial sector, which is bolstered by the fact that just five per cent of Sydney’s industrial zoned land is now undeveloped and serviced, amounting to only 605ha of prospective supply.

“This lack of land availability is particularly evident in Sydney’s inner precincts, which are becoming ever more sought after as ‘last mile’ hubs as ecommerce penetration rates rise,” Ms J-Baleh said.

“As an example, just 0.2% of the city’s undeveloped, serviced land is situated in Sydney’s north shore, compared to 43.4% in the outer south west, and this is being clearly reflected in land and rental value differences.

“Over the next 18 months we forecast further limits to the availability of undeveloped and serviced land in Western Sydney, with no availability expected in Sydney’s inner precincts over the medium term.”

According to the CBRE study, Sydney land absorption has averaged 137ha per year over the last decade, while leasing activity has averaged 805,000sqm.

The anticipated 720,000sqm of ecommerce space needed in the next four years translates to a 37 per cent increase in total supply levels compared to past norms.

CBRE Pacific Regional Director, Industrial & Logistics Cameron Grier said given Sydney’s limited development pipeline and lack of speculative activity, rental growth rates were expected to rise and result in further land value appreciation over the short term.

“Even factoring in new serviced and zoned land corridors emerging in the medium term such as the Mamre Road Precinct and Badgerys Creek, a forecast rise in occupier demand is expected to offset any oversupply risks,” he said.

“The I&L land market has well and truly been reset and traditional institutional developers are now willing to pay prices that were previously only in the realm of data centres.”

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