Western Sydney industrial land values are tipped to rise by up to 25 per cent this year after growing around 50 per cent in 2021.
Agent David Hall, national director of industrial at Colliers, said he had never seen anything like it.
Based on deals he was now working on, Mr Hall said prices were already 10 per cent to 15 per cent above what was achieved at the end of last year.
“There’s very limited options left for groups to buy, and we’re still tracking over $2.5 billion worth of capital chasing industrial land in Sydney,” he said.
“That tells me if you were to ask ‘what does the horizon look like?’, I’d say somewhere between 20 and 25 per cent growth again this year.”
A key factor is rising industrial rents. ‘Groups running development feasibility studies at higher rents are going to have the ability to pay a higher residual land value than previously,” Mr Hall said.
The “only thing stopping it growing at the same rate as last year is that some of that rental growth will be offset by increased construction pricing”, he said.
“So that will put a limit, to some degree, on how hard growth will go this year. But in saying that, there’s nowhere the amount of options coming to market that we saw last year.”
In its latest Industrial Development Update for Western Sydney, Colliers said the region’s land values grew by 17 per cent in the first half of 2021 and double that from July to December, when they rose 34 per cent.
Supply is shrinking, with an estimated 1805 hectares of net developable industrial land available, 9.5 per cent less than in mid-2021.
“With uncertainty remaining around the volume of industrial land within the Aerotropolis [at Badgerys Creek], this undersupply is expected to persist in the short to medium term,” the report said.
“Fragmented ownership remains one of the largest barriers to development within western Sydney.”
Issues in getting development land to market, such as the provision of services, mean that as little as 227 hectares of industrial land could be developed in western Sydney this year.
“Demand has been extraordinary, with over 260 hectares taken up in 2021, which was almost double the levels recorded in 2020 and the long-term average,” Mr Hall said.
“The take-up of land was strongest within the Kemps Creek and Eastern Creek precincts.”
