Sydney Commercial & Industrial Property Market Review - September 2022
The Sydney Industrial market remains incredibly strong in the face of the five (5) consecutive interest rate rises since May 2022, with more rises potentially in the months ahead.
The fundamentals remain as they have for the last 12 months – Low to no vacancies – reportedly the “tightest market in the world”, high occupancy, strong customer demand and low levels of supply.
However, there are some signs of uncertainty creeping into the market as businesses wait to see where interest rates will peak.
Sales
The impact interest rate increases and rent growth over this calendar year have had an effect on investors with some privates and larger institutions not being as aggressive. They have elected to sit back as they analyse the market and balance the impact on rental growth against the higher cost of funding.
Owner-occupiers remain aggressive in their hunt for their next premises, particularly within the sub $10 million price point.
Recent noteworthy sales in Sydney include:
- Unit 8, 476 Gardeners Road Alexandria – a 1,908sqm strata unit sold off-market for $9.75m
- 6 Cobar Place Gregory Hills – a three (3)-unit development totaling 1,817 sqm, sold for $7.2m
Leasing
Leasing stock remains extremely tight in all markets and all size ranges. There has been a significant jump in the rentals achieved in all areas, as owners and tenants adjust to the limited supply. Some owners have now switched to a Price on Application for their leasing stock, to maximise their returns.
Any existing leases without a near term market review will have fallen behind the current market.
Rent reviews over the course of the last 9 months have moved from fixed increases of circa 3.5% to the greater of CPI or 4% with CPI giving property owners rental growth they have not experienced for many years.
Our view is that the market will remain strong for the remainder of the year, with new speculative leasing stock quickly absorbed by existing demand. Capital values are likely to peak, along with an evening out of rental rates. However, outgoings will continue to rise sharply in line with the substantial uplift in land values over recent years.
Looking ahead, the fundamentals for industrial property remain positive, with significant capital looking to invest, once the uncertainty of interest rate movements abates.
“..Low to no vacancies – reportedly the “tightest market in the world”, high occupancy, strong customer demand and low levels of supply.”