Does the case for a high-rise warehouse finally stack up?

Multi-storey warehouses such as this one are coming to some parts of Sydney. Photo: Shutterstock

Rising land values could lead to Australia's first high-rise warehouse

Sue Williams|May 20, 2020

Rising industrial land values close to Sydney, versus the cost of transport to move e-commerce goods to industrial storage further out of town, are making the business case finally stack up for multi-level warehouses.

Now it’s possible the first high-rise warehouse in Australia could be built in south Sydney, close to the airport and port, by mid-2022.

But unlike Hong Kong, which is believed to have the world’s tallest warehouse at 24 storeys, Sydney’s will likely be only three to five levels.

“Their land prices are seven times higher than ours, and they have limited amounts of land while we have so much,” said Cameron Grier, CBRE’s regional director, Pacific industrial and logistics, advisory and transaction services.

“Before COVID-19, the idea was starting to gain traction as we’ve seen land values getting up to a price point in Sydney to make them feasible – up in south Sydney by 67.3 per cent in the past five years – but the pandemic has pushed that out, and now I think the first will probably be at least 24 months away.”

Companies are still working on possible designs for such structures, crunching numbers and working out what height limits would be allowed for different zones, especially under flight paths. Then they’ll have to apply for DAs and capital, and tender for construction.

And so much still depends on land values. “Construction costs go up considerably when you go up a level,” said Tony Crabb, national director of research Cushman & Wakefield. “That might be too big a gamble for some businesses.

“But the pressures to do it are certainly there and have been increased by the pandemic as there’s so much more online retail happening, the requirement for warehousing and the possibility of the reintroduction of more local manufacturing. That could be enough to tip the argument for multi-level warehousing, particularly near the port.”

Working against that is the opening up of vast new tracts of industrial land around Sydney that could offer much cheaper single-level alternatives. With the construction of the new airport at Badgerys Creek as well, the land in the south-west could prove a better value proposition.

Mike Ferrari, of Savills Parramatta, said that could scupper the vertical vision.

“There’s been talk of it, but I feel with so much new land around Badgerys Creek and Kemps Creek, that might not make it worthwhile,” he said.

“Multi-levels are only really handy if people want to stay closer into town where land is more expensive. But the spending we’ve had on roads and other infrastructure recently makes it cheaper for companies to move further out, and stick to one level.”