Sydney to see nearly 600,000sqm of new industrial supply this year

Majority of the projects to be completed soon are already pre-committed.

According to JLL, 577,800 sqm of industrial space is currently under construction in Sydney, with completion expected in 2024. Projects completing over the next six months (321,300 sqm) are already 70% pre-committed.

Yields are forecast to have concluded their decompression cycle and should stabilise over the short term.

Here’s more from JLL:

Gross take-up increased 14% q-o-q to 184,400 sqm in the quarter; however, it was 19% below the ten-year quarterly average. Despite continued demand for industrial space, leasing activity was restricted by limited availability. The Outer South West precinct accounted for the largest portion of quarterly leasing activity, with 61% of the gross take-up.

The Transport, Postal and Warehousing sector accounted for the largest portion of quarterly take-up for the Melbourne market, comprising 31%. This was followed by the Retail Trade sector accounting for 16%.

Practical completions increase

There was an increase in practical completions over the quarter, with 184,400 sqm of supply brought to market. This is a level 35% above the ten-year quarterly average. On the back of several subdued supply quarters, the elevated supply pipeline is expected to continue into 2024.

The Outer South West precinct accounted for the largest portion of quarterly completions for the Sydney market, comprising 61%. This was followed by the Inner West precinct accounting for the remaining 39%.

Rent growth continues to be driven by low vacancy

Low vacancy continued to drive rent growth, but at a lower rate compared to recent quarters. Prime rents grew across all tracked precincts in the quarter, with the South precinct recording the highest growth of 9.0% q-o-q. The South precinct also led Secondary grade rent growth, recording 9.8% q-o-q. However, incentives have also risen in most precincts.

The Sydney market investment volume totalled AUD 552.2 million over the quarter. This is 50.7% above the ten-year long-term transaction average.

Note: Sydney Logistics & Industrial refers to Sydney's industrial market (all grades).