Sydney Commercial & Industrial Property Market Review - September 2024
“...Once business confidence increases, we forecast an increasing level of demand and a stronger take up of supply.”
The Sydney industrial market, despite Australia’s recently announced low GDP number, remains relatively robust and surprisingly resilient.
This has been driven by sustained demand and limited supply, particularly in the sub 3,000sqm size range. Having said this, supply has increased substantially in the 4,000sqm + size range, resulting in an increase in vacancy rates.
Incentives have increased as a result and rental rates have certainly cooled across the market. In the second quarter of 2024, Sydney recorded one of the slowest periods for new lease take-ups since 2015. The development pipeline continues to add new space, primarily in Western Sydney, though much of this space has been pre-committed, reflecting ongoing confidence in the industrial sector despite economic headwinds.
On the purchaser side, with ongoing high interest rates and the likelihood of them remaining at this level for the next 6 months or so, investor interest in purchasing is very selective and price sensitive.
Owner occupiers are present, though the number of genuine purchasers who are in a position to fund acquisitions is down. Capital values for existing buildings and land have come off the highs of late 2022 in most cases.
We forecast a flat market for the next 6-12 months, with weaker demand than we have seen for several years, however once business confidence increases, we forecast an increasing level of demand and a stronger take up of supply, resulting in lesser tenant incentives and firmer rental levels and capital values.
Mark Cadman, Link Property Services