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Multistorey warehouses answer Sydney’s logistics dilemma

By Juliet Helmke
05 October 2023 | 12 minute read
sass j baleh nathan egan reb o3rhdy

Sydney’s warehouse availability is looking up – literally.

A new trend is emerging in the NSW capital where industrial and logistics space is notoriously hard to come by. Following in the footsteps of cities like Tokyo, Hong Kong and Shanghai, the city is looking to take its warehouse space upwards, with several multistorey projects in the pipeline.

According to research by CBRE, multistorey warehouses are expected to account for approximately 15 per cent of Sydney’s new industrial stock between now and 2027. This will provide approximately 850,000 square metres of multistorey floorspace across 20 different projects currently in different phases of planning and construction.

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Roughly a third of the space is currently being built or has DA approval, with at least six multistorey warehouse projects materially in the pipeline.

CBRE found that most of the projects are being speculatively developed and have a pre-commitment rate of approximately 70 per cent.

Charter Hall’s 27,059-square-metre Ascent on Bourke is one such development that provides an insight into what shape the warehouses are expected to take.

Located in Alexandria, the build is almost 100 per cent pre-committed and due to be completed in Q3 2024. It includes two levels of high-clearance warehouse facilities as well as office space offering full fit-out flexibility.

Warehouses in some of Asia’s most densely populated cities have been built up as high as 17 storeys, though in Sydney many of the multilevel builds are still fairly low-lying.

CBRE puts the prevalence of multistorey buildings in Sydney above other Australian cities largely down to the city’s space constraints.

South Sydney is attracting the bulk of multistorey industrial and logistics projects, given the market’s outsized land constraints and the growing demand for “last mile” e-commerce distribution centres.

Rents in some of the regions where multistorey warehouses are prevalent vary from AU$180/sqm in Beijing to AU$600/sqm in Hong Kong. The South Sydney market average rent for super prime grade assets is currently in the mid-range of these precincts, at AU$325/sqm.

The firm’s head of industrial and logistics research in Australia, Sass J-Baleh, said: “The key drivers of multistorey warehouse development include limited industrial land and high land values in prime locations, coupled with heightened demand from e-commerce related occupiers.”

Though many Australian cities are now running up against these constraints, Ms J-Baleh noted that Sydney’s historical issues have forced developers into action.

“With tight supply conditions unlikely to ease in Sydney due to land constraints, multistorey warehousing is providing one means of delivering new floorspace to the market,” she added.

CBRE’s South Sydney managing director, Nathan Egan, commented that developers are wise to look up in Sydney’s market.

“South Sydney is well-positioned to accommodate multistorey warehouses, and the current development pipeline is concentrated within this market as consumer delivery expectations heighten and occupiers focus on ways to decrease delivery costs,” he said.

“On average, transportation accounts for 50 per cent of overall supply chain costs, while occupancy costs account for around 10 per cent. So, location is paramount, particularly for those occupiers who transport time-sensitive goods, and occupiers with a stronger requirement to lower their transport costs will have a greater elasticity to pay a rental premium for warehouses in prime, inner-city locations,” Mr Egan added.

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ABOUT THE AUTHOR


Juliet Helmke

Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.

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