Sydney is one of the few locations where the countries main port, airport and CBD are within such close proximity to each other and a major industrial centre. Businesses locate themselves in south Sydney to provide a competitive advantage, or simply by necessity, as they require access or proximity to air and sea ports or the CBD. As a result of this demand for a strategic location, and a significantly reduced supply, we are witnessing substantial growth in rental and capital values.
Another contributing factor is that we are not seeing the recycling of industrial property for new industrial development. Obsolete industrial properties are rarely being demolished and redeveloped into new industrial to help meet demand in the location. These obsolete industrial facilities are in high demand for conversion to “funky” or “creative” office, retail or showroom space, that is seeing rental values achieved that are at a rate two and three times that of traditional industrial space once the space is refurbished. This has also opened up additional areas in the market that cater for the users of this space, in particular café’s and retail uses that are justified due to the increase in foot traffic as a result of the greater numbers of staff that are generally attributed to office occupation, against that of a traditional industrial use. This has seen a substantial increase in amenities in the area, with café’s, restaurants and retail becoming far more prominent.
So what does it all mean? I think we will continue to see strong capital and rental values for properties in South Sydney and we will continue to see those businesses that do not have a substantial competitive advantage for being in such a highly sought after location, drifting out to surrounding regions, in particular within the inner west and south west corridor, where we will also continue to see growth in values for these regions as a result.
Artie Kalpidis is a partner at Link Property Services and works out of our Alexandria office.