A new wave of multi-level strata warehouses is emerging in Sydney as developers battle a shortage of zoned industrial land and surging land prices, which have risen 17 per cent over the past year.
In their latest Industrial Research and Forecast Report, commercial agents Collier International said multi-level strata developments were an emerging trend, especially in Sydney’s land-constrained north and south markets.
These two markets account for just 3 per cent and 13 per cent respectively of total available zoned industrial metropolitan land in Sydney.
“As land in these markets is constrained, it is projected that the development of multi-level industrial strata buildings will become ever more attractive to maximise floor space ratios and market values particularly as small businesses continue to demand space near the CBD,” said report author Sass J-Baleh, associate director of research at Colliers International.
Among those building multi-level facilities is Financial Review Rich Lister Bob Ell’s Leda Holdings, which sold out a 13-unit industrial estate at Taren Point in the south. The development features self-storage units on the ground floor and warehouses and showrooms above.
Malcom Tyson, managing director of industrial at Colliers International, said multi-level warehouses were not new in Sydney, but had re-emerged recently due to a lack of available zoned land.
Mr Tyson said these smaller warehouses were popular with pharmaceutical and tech businesses which needed storage space close to the CBD that didn’t require access by double trucks or semi-trailers.
“Because they are in more densely concentrated areas close to the city, they tend to generate higher rents and higher capital values,” Mr Tyson told The Australian Financial Review.
While Sydney industrial rents were virtually flat over the past year – up 1.4 per cent to $142 per square metre – they are forecast to start rising as land values and capital values rise further.
In Melbourne, Colliers International said a rising scarcity of developable land in the city fringe and south-east sub-markets was also placing upwards pressure on land values and driving an increase in the development of vertical warehouses.
Examples include the massively delayed new high bay refrigerated sheds for Fonterra, McCain’s and Peters Ice-Cream being developed by Dutch group NewCold and a recently completed Woolworths distribution facility in Dandenong that is now the highest industrial building in Melbourne.
In the north, which accounts for 60 per cent of Melbourne’s new warehouse supply, land values increased 7.5 per cent over the first quarter of 2018 averaging $288 per sq m after remaining stagnate since December 2016.
“Growth in land value was underpinned by the lack of prime grade stock and underlying demand competition from food groups, logistics and packaging industries seeking sites to expand their manufacturing footprint,” said Colliers International research manager Anika Wong.