We often read of the property cycle and commentators giving their opinion on where we are in the cycle at any particular time, but there is something very different about the state of play in South Sydney, in the past two years in particular.
There has been unprecedented growth in both capital and rental values. We have seen examples where rents within particular estates in Alexandria and Rosebery have risen from levels of $150 to $160/sqm p.a. net to a point now where similar units within this same estate are commanding $225 to $235/sqm net p.a., all within the space of eighteen months. We are experiencing lease deals on both industrial and commercial premises being struck at a premium to asking rentals due to the competition for space. This has been driven by a variety of factors.
There has been a substantial reduction of industrial zoned land in the south Sydney precinct as well as areas being rezoned to more flexible zones, which permit industrial, along with commercial or bulky goods, such as B6 Enterprise Corridor, or a variety of mixed use zones, which often permit medium to high density residential. We have seen many industrial owners benefit greatly from these rezoning’s and many have strategically cashed in, however, many still need to house their business in south Sydney for competitive reasons.
We have watched as many of these owners, who may have benefited from the sale of their premises, due to a drastic shortage of purchase opportunities, being compelled to lease premises, which has also contributed to this rental growth. We have also seen occupiers within the south Sydney precinct being displaced as a result of infrastructure projects, such as the West Connex and Metro Rail projects. This has seen a significant increase in occupier enquiry and also contributed to the reduction in supply.
Artie Kalpidis is a partner at Link Property Services and works out of our Alexandria offices.