Opportunity – there is so much happening in NSW with vast infrastructure projects continuing to stimulate employment and growth, with the obvious knock on effects. A housing market with tractor like torque that continues to surge forward, leading to growing household equity and wealth, underpinning the small to medium end of the industrial market.
The burgeoning development of alternate uses in the South Sydney markets coupled with compulsory acquisitions of land for infrastructure projects will lead demand for space under 2500sqm, and see a continual decentralisation of industrialists along the M5 south west corridor. We expect incentives in the south west to come under pressure and rentals start to drive upwards as demand/supply imbalances turn in favour of the landlord.
Quarters 3 and 4 of 2016 were characterised by strong leasing demand for warehouses between 10-20,000sqm, however conversion rates were quite low. We expect this to turn around in 2017 with international corporate strategy no longer at the mercy of a pending US election.
2017 will be an interesting year to track property yields, with mooted inflationary pressure in the US pressuring interest rates. Fundamentals regarding investment strategy will therefore remain key, and we expect assets that are higher yielding to be attractive with intelligent value add strategies.
Prime rentals in Western Sydney showed circa 5% average growth and with the aforementioned pressure on the supply & demand curve this trend should continue if not increase. Land values will continue to rise due to the shortage of available purchase options. Very few small lot industrial subdivisions are available to provide the private investor and business owner opportunity to acquire and build, hence extremely limited supply will see square metre rates continue to climb.
Author: Jeff Pond
Jeff is a partner of Link Property Services in Sydney NSW. Jeff is located in the Link Property Services Silverwater office.