Over 1m sqm of industrial supply currently under construction in Sydney
Over 40% is pre-committed.
In a report, JLL said 14 industrial projects reached practical completion in Sydney in Q2 2024, adding 264,518 sqm of stock to the Sydney industrial market. Supply delivery was almost double the ten-year quarterly average (143,368 sqm).
JLL is tracking 1,007,573 sqm of supply currently under construction in Sydney, of which 43.3% is pre-committed. Of the new supply, 77.0% will be delivered to the Outer Central West precinct.
Here’s more from JLL:
Occupier activity in Sydney’s industrial market was slightly below the long-term average, reaching 206,354 sqm, compared to the ten-year quarterly average of 230,418 sqm.
Demand was concentrated in the Outer Central West precinct, largely driven by Amazon’s commitment to two Horsley Park facilities for bulky goods storage over a total of 90,898 sqm.
Patchy rent growth with an uplift in incentives
In Q2 2024, rent growth had become more concentrated in well-located suburbs with a low supply of prime space. Rent increases have been partially offset by rising incentives, with the prime midpoint incentive doubling y-o-y to 12.1%.
Strong investment market activity was seen in the quarter, totaling AUD 1,444.3 million, up 8.4% from Q1 2024. The largest asset sale was Goodman Australia Industrial Partnership’s acquisition of Sir Joseph Banks Corporate Park for AUD 170.0 million.
Outlook: Stabilising yields
Modest face-rent growth is expected to continue, accompanied by a continued uplift in incentives. Uncertain supply delivery timeframes are raising economic rents for pre-lease deals. We may see some developers delay the commencement of new projects.
We expect to see yields begin to stabilise from late 2024. With rent growth moderating, we may see investors increase allocations to core products with long WALE covenants to mitigate increasing vacancy risk over the medium term.