Industrial demand in Sydney breaches 10-year average by 54%

Gross take-up reached 313,110 sqm in Q1.

According to JLL, occupier activity remained elevated this quarter, with demand outperforming the 10-year average by 54%. Gross take-up totalled 313,110 sqm in 1Q21, driven by strong expansionary activity from the Retail Trade and Transport, Postal & Warehousing sectors which accounted for 74% of take-up. 

Development completions reached a record low in 1Q21, says JLL, demonstrating the impacts of the pandemic on development decision making throughout 2020. Supply delivery totalled 31,750 sqm in 1Q21, and marked the first quarter that no speculative stock was delivered since 1Q18. The short-term supply pipeline indicates that completions will begin to accelerate in the back half of 2021, in line with developer confidence returning in late 2020. 

Here’s more from JLL:

Rents increased across most precincts in the Sydney market in 1Q21, while incentives appear to have peaked and are starting to trend down. Quarterly growth rates reached as high as 1.6% in the Outer Central West precinct, pushing the whole market average up by 0.3% (1.8% y-o-y). 

AUD 290.2 million of transactions were recorded in 1Q21 (>AUD 5.0 million). A lack of investment grade product being brought to market, combined with the volume of capital seeking exposure to the sector, has placed pressure on prime yields, which compressed by 14 bps.

Other key figures:

4.4% North Prime Annual Rental Growth: Declining availability of assets and serviced land has placed pressure on rents in most precincts over the last 12 months, despite prevailing economic headwinds. The strongest growth has been recorded in the North (4.4%), Outer Central West (3.5%) and Outer South West (3.1%).

1,224,460 sqm Rolling Annual Gross take-up: Activity has been concentrated on the Outer Central West precinct, which has accounted for 46% of the market total in the last 12 months. Take-up was led by the Retail Trade sector, which totalled 549,390 sqm – 71% higher than the next most active sector.

4.25%– 4.63% Outer Central West Prime Yield Range: Midpoint yields have recorded strong compression across all precincts in the last 12 months, with prime yield midpoints compressing by up to 75 bps in the Outer North West. With a number of major transactions occurring in early 2Q21, there is ample scope for further yield compression this year.

671,960 sqm Under Construction: We are currently tracking 523,240 sqm of stock which is under construction and due to complete next year, with the balance (148,720 sqm) expected to deliver in early 2022. Furthermore, there is an additional 229,260 sqm of stock which has approved plans and is forecast to complete by the end of next year, which indicates that 2021 will be another above-average calendar year for completions.