Industrial land supply under pressure as new Sydney airport takes off in the west

Land shortage and planning challenges are putting pressure on the already stretched industrial property sector, and the opening of the new airport will see demand skyrocket in the western suburbs.

CBRE’s latest Sydney industrial and logistics land supply report highlights that the total new development supply expected to be delivered in 2023 and 2024 has a high pre-commitment level, at 63 per cent and 48 per cent respectively.

With just 4 per cent of the total industrial-zoned land in the Sydney Metropolitan Region being undeveloped and serviced, the report highlights a chronic stock shortage, with supply falling well short of demand from transport & logistics, e-commerce and manufacturing occupiers.

CBRE’s Australia and New Zealand regional director, industrial & logistics Cameron Grier, said the available pipeline of industrial and logistics land on the Eastern Seaboard remains very tight by historic levels.

“However, while Queensland and Victoria are running low on land, Sydney faces a different dilemma with vast amounts of zoned land but planning authority challenges, which means that most of this land won’t be unlocked until way into the future,” Grier said.

“This could potentially see some larger occupiers being forced to consider Melbourne or Brisbane until developers can provide certainty of delivery on many sites.”

The Aerotropolis will ultimately relieve most of Sydney’s future land pressure challenges, however, if the lessons of Kemps Creek around planning and timeframes are not learnt, Sydney is going to lose business to the other states.

CBRE’s head of industrial and logistics research Sass J-Baleh said the supply response has been insufficient to meet demands in the Sydney market and this lack of land supply is driving significant appreciation in land values, with 25 per cent year-on-year growth recorded for 1.6ha lots over the past three years.

“In comparison to some other major offshore markets, Australia’s share of floor space under construction to total space is one of the lowest globally.”