Strong Central Western Sydney industrial market performance continues

THE sub-5,000sq m industrial market in the Central Western regions of Sydney has continued to perform well over the last six months after a robust few years, according to Ray White’s latest Between the Lines* commercial research.

Rezoning has seen total industrial land stock decline and new supply being heavily demand-led. The report went on to say occupation levels had improved which had seen a reduction in available stock from 272,000sq m in July 2018 to its current rate of 236,400sq m.

Ray White Head of Research Vanessa Rader said the current rate of vacant industrial stock in the region was represented across 233 properties.

“Over the past six months, we’ve seen the level of vacancy fall 13.07 per cent from over 270,000sq m, with the greatest improvement seen in Central North West,” Ms Rader said.

“Across our survey area, the greatest volume of available stock is in the Central South West precinct where there’s approximately 92,300sq m on the market, down from 108,400sq m in July 2018.

“Central North West and Central West account for 23.64 per cent and 37.31 per cent respectively of the total vacant pool of the survey area.

“Central North West is heavily owner occupied and currently has 55,891sq m of vacant stock, most notably in Seven Hills. While the Central West region has been one of the poorer performers, representing 88,207sq m of vacant stock, up from 85,382sq m six months prior.”

Ms Rader said across the total Central Western Sydney region there were 233 vacant assets at an average size of just over 1,000sq m.

“The sub 500sq m size range represents the largest volume of vacancies being 86 assets, the bulk of these are in Central North West (38) followed by Central West (32), emphasizing recent supply additions of smaller strata industrial units in these locations,” she said.

“In contrast, the larger 1,001-1,500sq m size range, which currently has 45 properties vacant or 58,429sq m, are dominated by more secondary assets in both the Central West and Central South West, due to their age and quality.

“The suburb that’s yielded the greatest number of vacancies is Seven Hills, dominated by smaller industrial units. It has 36,991sq m vacant across 45 properties, resulting in an average size of just 822sq m.”

Ray White Commercial NSW – Western Sydney Associate Director Sam Bechara said Central West had attracted the highest rents, given its more central location.

“It’s ripe for business operation and customer access. Rents here have grown to an average of $120/sq m for secondary, and $150/sq m for prime assets, yet still rents achieve above this range to as much as $200/sq m,” Mr Bechara said.

“Demand in the Central North West has subdued somewhat for rental assets, notably this area has a high level of owner occupation, while Central South has grown in appeal given the newer stock that’s entered this previously older style market.

“Average prime net face rents for the Central South West is now $135/sq m, while Central North West is slightly less at $132/sq m, with secondary rents  averaging $103/sq m and $105/sq m respectively.”

Mr Bechara said despite the speculated uncertainty in the market due to the reduction in funding availability, investment yield levels continue to reduce.

“While volumes of sales have seen some reduction, the values attributed to these sales has been in contrary to the subdued sentiment surrounding the Royal Commission and the upcoming State and Federal election,” he said.

“These events have not dampened the confidence in the industrial market, with many local, private buyers continuing to seek investment in this location, although there has been a more subdued, measured approach to investing.

“Encouragingly there has been further compression of the already low industrial yields, achieving rates well below the prior record levels recorded pre-GFC.”

*Ray White Between the Lines Commercial Research – Central Western Sydney Industrial (sub 5,000sq m) – January 2018.