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Sydney industrial research forecast report   second half 2012
 

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    Sydney industrial research forecast report   second half 2012 Sydney industrial research forecast report second half 2012 Document Transcript

    • SECOND HALF 2012 | INDUSTRIALRESEARCH & FORECAST REPORTSYDNEY INDUSTRIAL Prime Grade Yields Tighten and Rents Rise The divergent performance of Sydney’s industrial market continues with strong demand for high quality properties tightening the availability of Prime Grade assets. While Secondary Grade facilities have experienced soft enquiry levels from investors and tenants alike. Secure, long term leases and competitive yields that Prime Grade assets offer have driven risk averse institutional buyers back into the market. While consolidation and cost reduction strategy’s has seen tenants seek out quality facilities that assist the performance of their businesses. Domestic and foreign institutional investors have dominated market with GPT, GIC of Singapore,94-106 Lenore Lane, Erskine Park Goodman, Charter Hall, DEXUS and Aviva all purchasing assets over the past six months.This newly built 21,143m² Prime Grade office/ Strong demand combined with a lack of industrial facilities on the market has seen yields beginwarehouse facility was purchased by GIC of to tighten and capital value growth across Prime Grade markets.Singapore from DEXUS for $28 million in June This tightness has seen opportunistic buyers begin to look at functional, well located, B and C2012, representing a yield of 8.15%. Grade assets with the aim of renovating, re-leasing and repositioning the property, to take advantage of the capital growth potential. An example of this is Aviva Investors new AustralianMARKET INDICATORS FORECAST - 6 MONTHS Value Enhanced Logistics Trust which will look to acquire such assets. OVERALL PERFORMANCE Business consolidation has continued to drive tenant movements across Sydney’s industrial markets. While ongoing demand for Prime Grade facilities has seen net face rents grow by an NEW SUPPLY average of 4.3%, over the past six months. TENANT DEMAND The pre-lease market has continued to remain active with the largest pre-commitment over the past six months being signed by Super Retail Group at Lenore Drive, Erskine Park. The newly built INCENTIVES Prime Grade facility will cover approximately 45,000m² with a lease term of 15 years being agreed. FACE RENTS CAPITAL VALUES SYDNEY INDUSTRIAL MARKET INDICATORS YIELDS Average Net Face Average Average Capital Average Average Land Region Grade Rents ($/m² pa) Incentives Value ($/m²) Market Yield* Values ($/m²) LAND VALUES LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH Prime $160 $190 12% 15% $1,900 $2,300 8.00% 8.75% NORTH $400 $900 Secondary $110 $150 15% 18% $1,250 $1,700 9.50% 11%KEY HIGHLIGHTS Prime $110 $120 8% 10% $1,300 $1,700 8.00% 8.50% NORTH $240 $350• Demand for high quality, functional assets WEST Secondary $90 $105 8% 10% $800 $1,100 9.25% 10.00%+ has remained strong from owner occupiers, Prime $130 $160 8% 10% $2,000 $2,600 7.75% 8.25% investors and tenants. SOUTH $500 $1,200 Secondary $100 $120 8% 10% $1,500 $2,000 8.50% 10.00%• Prime Grade rents have increased by as Prime $95 $115 8% 10% $1,100 $1,600 8.00% 8.75% SOUTH much as 5% in some markets, over the past WEST $150 $350 Secondary $70 $85 10% 13% $800 $1,100 9.00% 11.00% six months. Prime $115 $140 8% 10% $1,600 $1,850 7.50% 8.25% INNER• Prime Grade yields show signs of tightening WEST $300 $500 Secondary $95 $115 10% 12% $1,200 $1,500 9.00% 10.00% due to an increase in demand from domestic Prime $110 $125 8% 10% $1,200 $1,500 7.50% 8.25% and offshore institutional investors. CENTRAL $250 $350 WEST Secondary $85 $100 8% 10% $800 $1,200 8.75% 10.50% Prime $105 $115 8% 10% $1,100 $1,400 8.00% 8.75% OUTER $175 $250 WEST Secondary $75 $90 10% 12% $800 $1,100 9.25% 11.00% * Equivalent Reversionary Yield Data correct as of Q3 2012 Source: Colliers International Researchwww.colliers.com.au/research
    • RESEARCH & FORECAST REPORT | SECOND HALF 2012 | INDUSTRIAL | SYDNEY Economic Update SOLID NATIONAL ECONOMIC GROWTH The June Quarter 2012 ABS Gross Domestic Product (GDP) data, showed in seasonally adjusted (SA) terms, GDP increased 0.6% during Q2 2012. Although slower than the strong result of 1.4% in Q1 2012, through-the-year GDP growth was a solid 3.7%. Deloitte Access Economics expect annual GDP growth to be 3.0% in 2012-13 and to rise to 3.4% in 2013-14 before easing to 3.3% in 2014-15. UNEMPLOYMENT RATE STEADIES AS JOBS GROWTH DISAPPEARS The unemployment rate remains at the healthy level of 5.2% (trend) where it has settled over the past four months. However, monthly full-time jobs growth has disappeared. August full-time jobs data shows there was a contraction (600) in the number of jobs. Over the 12 months to August 2012, full-time employment actually increased by 27,900 jobs and whilst this is the largest increase over a 12 month period since October 2011 it is well below trend. The ANZ Job Advertisement Series showed that number of job advertisements fell 2.3% in August after falling 0.8% in July to become the fifth consecutive monthly fall. CONSUMER PRICES SETTLE The latest inflation data from the Australian Bureau of Statistics (ABS) shows that annual headline inflation rose just 1.2% during the 12 months to June 2012, down compared with a rise of 1.6% through the year to March 2012. This saw the Consumer Price Index (CPI) grow by 0.5% during the quarter and ensures that the inflation rate remains well below the RBA’s target range of 2% to 3%. INTEREST RATES STABILISE Enough evidence that showed the national economy is growing at around trend, without excessive inflationary pressures, convinced the Reserve Bank of Australia (RBA) Board to keep the official cash rate steady at 3.25%, in November 2012. The RBA pointed out that the effect of action already taken to ease monetary policy can be expected over time. THE AUSTRALIAN DOLLAR After fluctuating around parity with the $US over the first half of 2012, the recent round of quantitative easing (QE3) announced by the US Federal Reserve has been accompanied by trade in the Australian Dollar at between $US1.02 and $US1.03. y y SYDNEY INDUSTRIAL MARKETS ad Mona km Ro le Vale 30 Va North West Mo na Pa Hornsby cifi c Hi gh wa North y ad Ro M2 Pi ttw at er M4 Parramatta Pa West rra m att aR M7 Inner West oad Sydney d Strathfield Bondi oa bow lR South n ch Liverpool Pu y Botany wa Kin South Western Motorway igh sH gG ce M5 eo rin rg P es Ro a d South d ay Roa Highw arra West wa y Illaw Hume gh Hi Kurnell es New inc Pr COLLIERS INTERNATIONAL | P. 2
    • RESEARCH & FORECAST REPORT | SECOND HALF 2012 | INDUSTRIAL | SYDNEYKey Market IndicatorsGDP GROWTH REMAINS ON TREND NATIONAL GDP V NSW GSP• Australia’s Gross Domestic Product (GDP) 5.0% has remained above trend with quarterly 4.5% growth of 0.6% and 3.7% growth in the 12 Forecast 4.0% months to June 2012. 3.5%• Forecasts suggest that the economy will dip Annual Growth (%) slightly to 2.8% over 2013, before rising 3.0% again to above 3% in 2014 and 2015. 2.5%• The latest ABS data shows that NSW State 2.0% Final Demand increased by 1.5% (SA) in the 1.5% June quarter 2012 and 3.4% (SA) over the 1.0% year to June 2012. 0.5%• NSW GSP is forecast to remain close to 0.0% trend over the next three years. After a slight 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 dip to 2.4% in 2013, it is expected to rise to NSW Gross State Product Australian Gross Domestic Product 2.9% in 2014 and 2.8% in 2015. Source: Deloitte Access Economics / Colliers International ResearchINDUSTRIAL CONSTRUCTION• Despite the success of a number of SYDNEY REGION INDUSTRIAL DEVELOPMENT PIPELINE speculative developments over the past 12 months, there are limited projects due for completion over the remainder of 2012. 250,000• Estimates show there is 232,200m² under construction across Sydney with only 200,000 6,000m² more than half way through the Industrial Floor Area (m 2) construction process. 150,000• The success of previous projects has seen an increase in planning for the next 100,000 development phase with approximately 219,500m² with development approval and 50,000 181,000m² in the process of tendering for construction. 0 Development Approval Contract Let Construction More Than Half Way Through But NotWEATHER LIMITS CONTAINER TRADE Project Status Yet Completed• August 2012 saw Sydney experience some severe weather which led to the closure of Source: Cordells / Colliers International Research Port Botany for three days; as such total container trade reached 181,890 TEUs, down 2.4% compared to same month last year. SYDNEY PORTS IMPORT CONTAINER TRADE (TEUs)• Full container imports for the 12 months to August 2012 was 177,750 TEUs, up 2.0% on 100,000 the same period last year. 90,000• The leading import regions were East Asia (46.1%), South East Asia (15.7%), and 80,000 Europe (15.3%). Number of TEUs 70,000• The top imported commodities for the period were Machinery and Transport Equipment, 60,000 Miscellaneous Manufactured Articles and Chemical Products, which combined 50,000 represented 58.1%.• Full container exports for the 12 months to 40,000 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 August 2012 was 82,600 TEUs, down 1.3% on the same period last year. Monthly Imports 5 Year Average 3 Month Trend Source: Sydney Ports / Colliers International Research COLLIERS INTERNATIONAL | P. 3
    • RESEARCH & FORECAST REPORT | SECOND HALF 2012 | INDUSTRIAL | SYDNEY Sydney North OWNER OCCUPIERS LOOK AT RENEWALS AND NIL COST MOVES INVESTMENT DOMINATE • Sales volumes across Sydney’s northern • Leasing enquiry levels have remained steady industrial market have risen over the past six over the past six months across northern months, as owner occupiers and investors Sydney. However, leasing volumes have perceive that the market has now passed the remained below average, as the majority of ‘bottom’ of the cycle. tenants continue to renew their lease and • Owner occupiers have dominated sales with stay put in their current premises. many purchasing assets at below • Those tenants that need to move, due to replacement cost. lease expiry or business contraction, continue • Owner occupiers purchasing for ‘part’ to look for options that allow them to move investment, has been an ongoing trend over with minimal or no cost. the course of 2012. This has seen owner • Despite this, larger quality Prime Grade occupiers purchase a multiple unit facility, in assets continue to remain in demand from which they move into one property and lease tenants looking to consolidate or expand their out the remaining units. This provides them business operations. Pharmaceutical and with an additional source of income and medical sector tenants especially have been room for future expansion if required. active in the market for such options.114-120 Old Pittwater Road, Brookvale • Despite an increase in volumes, capital • This has seen slight rental growth for PrimeThis Secondary Grade asset was purchased by values have remained steady at $1,900 to Grade rents which now range from $160 toPrimewest for $40.5 million, representing a market $2,300/m² for Prime Grade and $1,250 to $190/m² net, while Secondary Grade assetsyield of 10.53%. $1,700/m² for Secondary Grade facilitates. continue to range from $110 to $150/m² net. OPPORTUNISTIC BUYERS ENTER • Incentives have remained steady over the past six months. However, Prime Grade MARKET incentives are forecast to decline over the • Institutional investors continue to pursue short term due to demand pressures. assets within Sydney’s North. However, the • Prime Grade incentives currently range from stock, on or off market for sale, does not 12% to 15% while Secondary range from 15% meet their requirement of a Prime Asset with to 18%. long WALE. • The perceived ‘bottom the market’ has seen LACK OF LAND FOR SALE a number of opportunistic buyers look to • A lack of industrial land on the market for acquire Secondary Grade assets at yields sale has continued across Sydney’s northern higher than 10%. These buyers are looking to industrial market. The majority of land for take on the leasing risk, re-lease, reposition sale is located in Mount Kuring-gai, while and sell the asset within a three to five year Business Park zoned land also offers some time frame. industrial options in North Ryde. • The lack of investment sales transactions has • The Northern Beaches region has also seen seen yields remain steady with Prime Grade a number of land offerings over the past 12 ranging from 8.00% to 8.75% and 9.50% to months, however the majority have either 11.00% for Secondary Grade assets. been rezoned and developed into residential or is earmarked for a bulky goods facility. SYNDICATOR BUYS ON BEACHES • This has seen land values remain stable at • In one of the largest investment sales during between $400 to $900/m², for industrial the past 12 months, Perth based syndicator zoned land. Primewest, purchased 114-120 Old Pittwater Road, Brookvale from DEXUS for $40,500,000. • This Secondary Grade asset comprises two freestanding industrial buildings with a total lettable area of 30,645m². The property exchanged in May 2012 and represented an equivalent reversionary yield of 10.53% and capital value of $1,322/m². COLLIERS INTERNATIONAL | P. 4
    • RESEARCH & FORECAST REPORT | SECOND HALF 2012 | INDUSTRIAL | SYDNEY Sydney South PENT UP DEMAND LEADS TO AN • This comes at a time when landowners now INCREASE IN ACTIVITY perceive that land values have passed the bottom of the cycle and developments are • The cautious wait and see attitude from beginning to be financially viable. An increase tenants over the first half of 2012 has now in the number of land sales, to date in 2012, turned with pent up demand leading to an provides evidence of this with these increase in leasing activity during the second transactions set to seek pre-commitment for half of 2012. development, over the next 12 to 18 months. • The majority of activity remains for • This will be a significant trend for the South properties between 500m² to 1,500m² while Sydney market with the last pre-lease deal to limited availability of stock above 1,500m² occur being to Toll in 2009. continues to be an issue for larger tenants. • Large Prime Grade space available for lease PRIME ASSETS REMAIN TIGHTLY HELD continues to remain scarce across the South • Goodman’s acquisition of 105-111 Vanessa105-111 Vanessa Street, Kingsgrove Sydney market with only two options above Street, Kingsgrove is the only Prime GradeGoodman purchased this Prime Grade industrial 2,000m² currently available. investment sale to take place to date in 2012estate for $48.5 million in October 2012. • A forecast tightening of the supply, across within the South Sydney industrial market. South Sydney, has seen an increase in the The sale refelcted a capital value of length of lease terms negotiated by larger $1,960/m². tenants. Recently, a number of large logistic • Despite the lack of stock, enquiry from sector tenants have signed leases up to eight investors looking for quality assets remains years, in contrast to their standard approach strong and it is understood another three of shorter ‘contract’ type leases. properties are currently in due diligence or under offer. PRIME RENTS FORECAST TO RISE • Yields have remained stable over the past six • Despite the recent increase in leasing months at 7.75% - 8.25% for Prime Grade activity, rents across South Sydney have and 8.50% to 10.00% for Secondary Grade remained stable over the past six months. assets. Currently Prime Grade net face rents range from $130 to $160/m² with those having a • Owner occupiers continue to dominate sales higher office content achieving $180/m². activity across with a number of functional, well designed developments receiving strong • Ongoing tenant demand combined with the demand from buyers due to the lack of lack of available, large Prime Grade space existing freehold space on the market. and one landlord controlling the majority of these assets, is forecast to see rents rise • Capital values have remained steady with over the next six to 12 months. Prime Grade values ranging from $2,000 to $2,600/m² and Secondary Grade from • Secondary net face rents were steady over $1,500 to $2,000/m². the past six months at $100 to $120/m². • Incentives have remained stable at 8% to LAND BEGINS TO TRADE 10% for both Prime and Secondary Grade • There has been strong growth in demand for space while a lack of supply for larger stock land and development sites across South is expected to see upcoming deals done Sydney with five major land transactions below these ranges. taking place to date in 2012. PRE-LEASES TO COME BACK INTO • These sites were purchased by owner PLAY occupiers, developers and the City of Sydney Council. • The requirement of some larger tenants to be located close to Port Botany and occupy a • A further 55,000m² is under negotiation in property with significant hardstand space is Botany and represents the second last land expected to see a rise in the number of asset on the market for sale across the South pre-leases signed over the next 12 months. Sydney market. • The lack of existing buildings available for • Land values now range from $500-$600/m² lease and sale, that meet tenant in the Botany/Banksmeadow areas and requirements, will also drive occupiers into $1,000-$1,200/m² in the Alexandria/Mascot pre-lease arrangements with developers to area. build a custom facility. COLLIERS INTERNATIONAL | P. 5
    • RESEARCH & FORECAST REPORT | SECOND HALF 2012 | INDUSTRIAL | SYDNEY Sydney South West PRIME GRADE RENTS SHOW SIGNS OF • Privately owned companies continue to GROWTH purchase assets to occupy and in turn place in the business owners self-managed super • The South West industrial market has fund (SMSF). These buyers do not pay continued to experience a lack of new supply themselves an ongoing superannuation additions over the past six months, leading to payment but use the property’s income and a tightening of Prime Grade vacancy rates. capital return as their retirement nest egg. • The decline in availability, coupled with • Sales volumes remain at average levels and ongoing tenant demand for high quality as such capital values have remained stable space, has led to a growth in Prime Grade at $1,100 to $1,600/m² for Prime Grade rents over the period. assets and Secondary Grade from $800 to • On average Prime Grade net face rents $1,100/m². increased by 4.5% between Q1 2012 and Q3 • Despite ongoing demand for large, long 2012, to now range from $95 to $115/m². WALE, high quality properties, a lack of3 Brooks Road, Ingleburn • The growth in rents is evidenced in a number investment stock on the market for sale hasThis property consists of a 6,666m² warehouseon a site of 40,680m². It was sold with vacant of recent deals signed for the development of led to low investment transaction volumespossesion in October 2012 to DNL for $6,500,000, new assets in Moorebank, while existing across the South West over the past sixrepresenting a capital value of $975/m². buildings have also showed signs of growth months. with the lease of 2 Secombe Place, • This has seen yields remain stable however Moorebank in June 2012 executed at a rate they are forecast to tighten over the next six of $117/m² net. months as evidenced by ongoing demand • Tenant demand for Secondary Grade space pressure, growth in rents and enquires has continued to remain robust for functional levels. and well located assets, while lower grade • Prime Grade yields currently range from space has received patchy enquiry levels, 8.00% to 8.75% while Secondary Grade primarily from cost conscious tenants. remains at 9.00% to 11.00%. • This has seen Secondary Grade rents remain stable over the past six months and currently LAND PASSES THE BOTTOM OF THE range from $70 to $85/m². MARKET • Incentives for both Prime and Secondary • The South West industrial land market has Grade space have remained stable, due to begun to receive more interest from owner their current below average rate. Prime occupiers, developers and investors alike Grade incentives range from 8% to 10% over the past six months, as buyers perceive while Secondary range from 10% to 13%. that prices have now reached the bottom of the cycle. PRE-LEASES • Land values in the region currently range • The pre-lease activity has been focused in from $150 to $350/m² and buyers are now the Central South West region over the past starting view these prices, at the lower end, six months with the most recent deals as cheap enough to make developments focused in Moorebank with net rents of as stack up or even land bank. much as $120/m² being achieved. • However, volumes continue to remain below SALES TRANSACTIONS REMAIN average levels with financing and funding for STRONG acquisition remaining the main barrier for buyers. • Owner occupiers continue to dominate sales across Sydney’s South West industrial • Land of all sizes has begun to trade with market with large, functional, well located owner occupiers continuing to look to assets in high demand. purchase land, in order to develop a custom built property that is not available in the • A key driver behind these transactions is the current tight leasing market. lack of suitable premises in the market for lease, so buyers continue to look to acquire assets that they customise to meet their business’s needs. COLLIERS INTERNATIONAL | P. 6
    • RESEARCH & FORECAST REPORT | SECOND HALF 2012 | INDUSTRIAL | SYDNEY Sydney West CONSOLIDATION LEADS TO RISE IN • The largest rental growth has been seen in the SUB-LEASE SPACE recently complete, speculatively built facilities, which have received strong demand and are • Business consolidation and implementation of now fully leased. streamlined business practises has led to an increase in sub lease space over the past six • This has seen Prime Grade rents increase to months. now range from $105/m² in the Outer West to $140/m² in the Inner West. Secondary Grade • Businesses have also looked to merge their rents have remained stable due to the office and industrial premises leading to an availability of stock on the market and range increase in enquiry for higher office content from $75/m² to $115/m² net. warehouses. • Incentives have remained steady at 8% to 10% ENQUIRY FOR HIGH QUALITY ASSETS for Prime Grade, while Secondary Grade REMAINS STRONG incentives range from 10% to 12% in someLenore Drive, Erskine Park markets.The Bluestar Logistics pre-leased 40,016m² at • High quality Prime Grade properties haveLenore Lane from Logos Property. The deal was continued to receive strong lease enquiry levels PRIME GRADE DEMAND TO TIGHTENdone at a rent of $105/m² for 12 years with fixed across Sydney’s West, especially for assets YIELDSreviews of 3.5% per annum. between 5,000m² and 8,000m². • Demand for Prime Grade assets has been very • Prime Grade buildings remain in demand as strong from domestic and offshore REITs, companies continue to look at ways to superannuation funds and institutional buyers maximise their efficiencies and minimise their over the past six months. property related expenses. • These buyers are seeking yield driven • Secondary Grade enquiry levels have been soft investments that have secure, long term lease over second half of 2012, as tenants look to convents. Despite this, the lack of stock renew their lease and only commit to a nil cost available for sale has seen volumes remain low. move. • Prime Grade yields in Sydney’s West have • Despite this, cost conscious tenants have declined by 25 basis points over the past six looked to reduce their accommodation costs months and now range from 7.50% to 8.50%, and in turn C Grade buildings have received with further declines forecast over the short increased levels of demand. term. PRE-LEASE COMPETITION RISES • A lack of quality freehold assets on the market • An increase in the number of pre-lease options for sale has seen a slight rise in Prime Grade currently in the market provides tenants with capital values which now range from $1,100/m² an opportunity to secure a competitive lease on in the outer west to $1,850/m² in the inner a purpose built asset. west. • Competition to secure a pre-commitment has LAND VALUES FIRM AS increased over the past six months as the cost DEVELOPMENT CONTINUES of debt for developers declines and a rise in • Land sales have remained subdued across Prime Grade rents make new developments Sydney’s West due to ongoing uncertainty and stack up. cautiousness of buyers and funding • However, despite the opportunities in the constraints. market, pre-lease volumes over the past six • Despite this, land values have remained firm months have been soft, because tenants have due to a lack of fully serviced, ready to develop delayed their leasing decisions and have not sites sought by owner occupiers. given themselves enough time to get a purpose built facility developed. • The success of speculative developments by instituitional land owners over the past 12 NEWLY BUILT STOCK DRIVES RENTAL months, has led to a fresh round of GROWTH development applications being lodged, this • Ongoing tenant demand for high quality space should lead to an increase in construction and a lack of supply and availability has seen activity over the first half of 2013. rents for Prime Grade assets increase by 4.3% on average over the past six months. COLLIERS INTERNATIONAL | P. 7
    • RESEARCH & FORECAST REPORT | SECOND HALF 2012 | INDUSTRIAL | SYDNEYNew Supply Pipeline DEVELOPMENT UPDATE Estimated Address Suburb Total GLA (m²) Status Project Type Owner/Comment Completion Sydney West Under Development of a new estate, 2 of 5 Reedy Creek Eastern Creek 16,000 Q4 2012 New Development Construction units leased. Under Speculative development of new 57-75 Templar Road Erskine Park 28,000 Q4 2012 New Development Construction Prime Grade building. Australand. Freehold speculative EC4 Business Park Eastern Creek 18,000 DA Lodged 2013 New Development building. Interchange Park Eastern Creek 15,000 Pre-DA 2014 New Development Goodman Under Stage 1 of 4 units. Commitments 3 Basalt Road Greystanes 18,000 Q4 2012 New Development Construction already secured for 2 units. Looking to deliver a flexible, Bungarribee Industrial Estate Huntingwood West 30,000 DA Lodged 2013 New Development speculative development with multiple street frontages. Sydney South Adaptive reuse office space with 70 6A Huntley Street Alexandria 17,000 DA Lodged Q4 2013 New Development storage units and 9 industrial units. New 2 storey development 198 Bourke Road Alexandria 7,825 DA Lodged Q1 2014 New Development comprising storage units and industrial space. Under 41 high clearance factory units 10 Anderson Street Banksmeadow 4,438 2013 New Development Construction ranging from 73m² to 153m². Freehold land for sale with pre-lease 32 Swinbourne Street Botany 55,000 Available 2012 Land opportunities available. Under 15 industrial units (5 sold) and 64 91 Fitzroy Street Marrickville 3,407 Q1 2013 New Development Construction storage units (40 sold). Sydney South West Brand new, speculatively built Under warehouse with 11m internal 66 Jedda Road Prestons 5,700 Q4 2012 New Development Construction clearance and 4 oversized roller doors. Brand new warehouse with 9m Under internal clearance and 3 container 102 Lyn Parade Prestons 3,321 Q1 2013 New Development Construction height roller doors with awning of approx. 700m². Speculative 12,000m² building. 32 Bernera Road Prestons 12,000 DA Approved Q4 20123 New Development Can be split into three units of 4,000m² each.Source: Colliers International Research COLLIERS INTERNATIONAL | P. 8
    • RESEARCH & FORECAST REPORT | SECOND HALF 2012 | INDUSTRIAL | SYDNEYRecent Market Transaction ActivityLEASING ACTIVTY Address Suburb Start Date Area (m²) Face Rent* ($/m²/pa) TenantSydney North24 Herbert Street Artarmon Sep-12 2,375 $75n Gemini4-10 Carlotta Street Artarmon Sep-12 2,479 N/A Zaki2 Minna Close Belrose Aug-12 3,550 $90n Natures Care31 College Street Gladesville Jun-12 1,302 $97g RV Living2 Lincoln Street Lane Cove Nov-12 4,354 N/A Expocentric87-89 Mars Road Lane Cove May-12 2,588 N/A Alpine Medical157 Church Street Meadowbank Jun-12 2,888 N/A Golf Kart World50 Beaumont Road Mount Kuring-Gai Jun-12 2,567 N/A FlowcreteSydney WestInner West40-42 Carrington Road Castle Hill Aug-12 2,268 $118n Your Home Depot79 Owen Street Gledenning Jul-12 6,325 $100g AM Solutions13 Rowood Road Prospect Jun-12 3,111 $99n Australian Portable Solutions9 Distribution Place Seven Hills Sep-12 1,546 $135 Clevertronics7a Bessemer Street Blacktown Aug-12 11,900 $95 LinfoxInner West79-99 St Hilliers Road Auburn Aug-12 2,180 $125g Hill-Rom Australia62 Hume Highway Chullora Aug-12 9,569 $112 Allied Express39 Hill Road Homebush Aug-12 5,888 $105n Nolans Interstate TransportD3, 3-29 Birnie Avenue Lidcombe Aug-12 2,141 $137n T&B48 Egerton Street Silverwater Jun-12 2,134 $132.g Capital Smart9-11 Ferndell Street South Granville Jul-12 4,612 $90n CEVA Logistics1 Marple Avenue Villawood Jul-12 11,193 $70n Tes-Amm AustraliaCentral WestLot 4, Eucalyptus Drive Eastern Creek Jun-12 8,436 $115n Ceva Logistics17 Shale Place Eastern Creek Aug-12 3,053 $125n Century BatteriesBuilding 1, 42 Lisbon Street Fairfield Jul-12 5,435 $85g Gilbert Pty Ltd1-21 Percival Road Smithfield Jul-12 5,437 $95n Clark Equipment Sales1/147 Newton Road Wetherill Park Jun-12 10,657 $100n Propak Packaging118 Hassall Street Wetherill Park Oct-12 2,685 $104n Novatex Products Pty Ltd2/147 Newton Road Wetherill Park Jul-12 12,661 $100n IconicOuter WestUnit 2, Lot 5 Andrews Close Erskine Park Aug-12 12,050 $114n Silk LogisticsLot 5, Sarah Andrews Close Erskine Park Nov-12 5,385 $113n Fresenius Kabi AustraliaSouth Sydney30-34 Burrows Road Alexandria Jun-12 13,675 $90g John Holland Group300 Botany Road Alexandria Aug-12 3,750 $100g Brand Republic69 Bourke Road Alexandria Sep-12 2,057 $125n Australian Postal Corporation1A Hale Street Botany May-12 4,655 $125n Business Print (Australia) Pty Ltd283 Coward Street Mascot Jul-12 10,170 $130g Toll5-9 Ricketty Street Mascot Oct-12 1,529 $165n Medisca Australia Pty Limited444 Gardeners Road Mascot Oct-12 1,171 $140n Pabs Furniture Rentals33-41 Military Road Matraville Jul-12 20,899 $140n DHL2-12 Beauchamp Road Matraville Sep-12 1,812 $90n JAS Forwarding Worldwide Pty Ltd6-12 Durdans Avenue Rosebery Jun-12 1,368 $140n Newslink809-821 Botany Road Rosebery Sep-12 830 $155n Comfit Pro34A Burrows Road St Peters Oct-12 3,256 $76g Greyhound AustraliaSydney South West350-352 Hume Highway Bankstown Jun-12 2,500 $75g Dragon Interiors11 Mount Erin Road Campbelltown Oct-12 1,571 $80n RRT AustraliaUnit 8, 350 Edgar Street Condell Park Jun-12 4,094 $95n NAK Australia350 Edgar Street Condell Park Oct-12 2,048 $123g Tabookai International24 Lancaster Street Ingleburn Aug-12 2,361 $93n World Wire Cables38 Aero Road Ingleburn Sep-12 2,146 $83n Acacia Timber Products2 Secombe Place Moorebank Jun-12 6,669 $117n Clemenger International Logistics23 Ash Road Prestons Jun-12 8,505 $110n Fizz Bizz Beverages34-38 Anzac Avenue Smeaton Grange Oct-12 11,009 $80n APC Australia72a Topham Road Smeaton Grange Sep-12 2,768 $85g Exalt Group*g denotes gross face rent, n denotes net face rent.Source: Colliers International Research COLLIERS INTERNATIONAL | P. 9
    • RESEARCH & FORECAST REPORT | SECOND HALF 2012 | INDUSTRIAL | SYDNEYRecent Market Transaction ActivitySALES ACTIVITY Sale Capital Value Address Suburb Sale Type Sale Price Yield** Vendor Purchaser Date* ($/m2)Sydney North114-120 Old Pittwater Road Brookvale Investment May-12 $40,500,000 $1,322 10.53% DEXUS Primewest Investment/ Owner7 Waltham Street Artarmon Oct-12 $2,925,000 $1,315 9.6% IAG Eurocars Mazda Occupier18 Herbert Street Artarmon Vacant Possession Jun-12 $6,050,000 - - Private Private87-89 Mars Road Lane Cove Vacant Possession Jun-12 $3,100,000 $1,198 - Private Private113 Wicks Road North Ryde Investment Jun-12 $8,600,000 $1,371 9.99% Allianz Kings Transport8-14 Constitution Road Ryde Vacant Possession Jul-12 $12,836,000 - - Private Holdmark EnterprisesSydney WestInner West2 Pike Street Rydalmere Vacant Possession Sep-12 $2,350,000 $1,521 - ADR Properties Private89 Fariola, 4 Carolyn & 6-8 Carolyn St Silverwater Vacant Possession Sep-12 $4,000,000 $678 - DEXUS Private94 - 100 Silverwater Road Silverwater Vacant Possession Sep-12 $7,500,000 $927 - Private AP Properties8 Egerton Street Silverwater Land Jul-12 $11,114,800 $662 - Chandru Data Centre11 Epic Place Villawood Vacant Possession Sep-12 $1,875,000 $1,077 - Kingsmede PrivateNorth West5 Gladstone Road Castle Hill Vacant Possession May-12 $15,003,104 $1,68 - Taylor Woodings (Receivers) Abacus178 Power Street Glendenning Land Jul-12 $3,078,000 $300 - Axis Fife CapitalCentral WestLot 9 Grevillea Place Eastern Creek Land Jun-12 $9,971,150 $310 - Australand Mitchell Foods94-106 Lenore Lane Erskine Park Investment Jun-12 $28,017,000 $1,325 8.15% DEXUS GICBellevue Circuit Greystanes Land Aug-12 $16,387,500 $345 - DEXUS Makita National Cold Storage &66-72 Newton Road Wetherill Park Land Aug-12 $5,331,400 $305 - Dolso Partnership Distribution375-381 Victoria Street Wetherill Park Investment Jun-12 $5,450,000 $996 9.26% Tersol Park PrivateSouth Sydney25-41 Mandible Street Alexandria Vacant Possession Aug-12 $18,000,000 $1,200 - Bricktop City of Sydney Council326 Botany Road Alexandria Vacant Possession Aug-12 $8,500,000 $3,207 - Private City of Sydney Council338 Botany Road Alexandria Vacant Possession Sep-12 $8,500,000 $2,319 - Private City of Sydney Council38 Bourke Road Alexandria Sale & Leaseback Aug-12 $8,500,000 $2,993 - Trycraft City of Sydney Council40-46 McEvoy Street Alexandria Sale & Leaseback Aug-12 $21,500,000 $2,795 - Private Meriton Constructions2-6 Burrows Road Alexandria Land Jun-12 $4,100,000 $1,012 - Private Owner OccupierLot 1, 100 Euston Road Alexandria Land Jun-12 $5,760,000 $1,200 - Private Owner Occupier131 – 139 Taren Point Road Taren Point Investment May-12 $7,400,000 $881 9.17% Rentaz PrivateSydney South West Campbelltown City4 Farrow Road Campbelltown Land Jul-12 $2,850,000 $250 - Private Investor Council62-64 Blaxland Road Campbelltown Vacant Possession Oct-12 $2,010,000 $1,864 - Private Investor Private3 Brooks Road Ingleburn Vacant Possession Oct-12 $6,500,000 $975 - DNL Private Asciano Properties Opera-Lot 205, 19-41 Broadhurst Road Ingleburn Land Aug-12 $1,450,000 $241 - Private tions7 Montore Road Minto Land Aug-12 $3,515,000 $150 - Foamco Industries Concrete Recyclers3 Reaghs Farm Road Minto Vacant Possession Aug-12 $2,575,000 $919 - Private Investor Lipa Pharmaceutical82 Gibson Avenue Padstow Vacant Possession Nov-12 $6,100,000 $686 - Private Sleep Easy8 Gatwood Close Padstow Land Jul-12 $862,000 $601 - Apex Transport Private297 Milperra Road Revesby Vacant Possession Jul-12 $2,020,000 $957 - Private Investor Private* Sale Date is exchange date**Yields quoted are equivalent reversionary yieldsSource: Colliers International Research COLLIERS INTERNATIONAL | P. 10
    • RESEARCH & FORECAST REPORT | SECOND HALF 2012 | INDUSTRIAL | SYDNEY INFRASTRUCTURE UPDATE Project Location Status Completion Comments 522 offices in Road Road Network Sydney and Under On going Enhance Sydneys motorway network including 62 countries on Upgrade State Wide Construction adding an extra lane in each direction on the M5 and M2. Upgrades to Great Western, Hume, Pacific 6 continents and Princess Highways. United States: 147 Greystanes & Central West Under Q4 2012 New road to link Wetherill Park directly to the M4 Wetherill Park Construction Motorway on/off ramps at Prospect. Canada: 37 access to M4 Latin America: 19 Asia Pacific: 201 Erskine Park Central West Under 2013 New 3.1km four lane divided road between Lenore EMEA: 118 Link Road Construction Lane, Penrith and Old Wallgrove Road, Blacktown Port • $1.8 billion in annual revenue Port Botany South Sydney Under 2012+ Stage 1 - approved in 2005. Includes a new 51 ha • 1.25 billion square feet under management Expansion Construction terminal at Brotherson Dock North and 4 additional • Over 12,300 professionals worldwide berths. Freight Rail Enfield Inner West Under 2013 12ha Intermodal Terminal with two 920m rail Intermodal Construction sidings, 70,000m² warehousing, 80,000m² Terminal hardstand for empty container storage, 60,000m² COLLIERS INTERNATIONAL ecological and community area Level 12, Grosvenor PlaceSource: NSW Government / Colliers International Research 225 George Street Sydney, NSW, 2000 TEL 02 9257 0222Outlook FAX 02 9347 0710According to the International Monetary Fund (IMF), global economic growth is expected toreach 3.3% during 2012, the slowest pace since the 2009 recession, before rising to 3.6% in RESEARCHER2013. This represents a downward reversion from its July forecasts when it expected growth of Mathew Tiller3.5% this year and 3.9% in 2013. Slower forecast growth in China is the main driver behind the Manager | Researchreversion and is expected to see softer growth for the Australian economy, as demand for TEL 02 9257 0348commodities slows into 2013. This softness is expected to see the RBA reduce the cash rate FAX 02 9347 0848further, in order to help stimulate housing investment and retail sales, pushing growth abovetrend in 2014. The Australian dollar is also forecast to remain strong and combined with fallinginterest rates is expected to see import volumes strengthen, providing support for underlying Colliers International does not give any warranty indemand for industrial space across Sydney. relation to the accuracy of the information contained in this report. If you intend to rely upon the informationRecent infrastructure plans, contained in Infrastructure NSW’s State Infrastructure Strategy, look contained herein, you must take note that the information, figures and projections have been providedto provide easier, quicker and more reliable freight movements across Sydney and in turn by various sources and have not been verified by us.further support industrial demand and values across the state. The strategy’s recommendations We have no belief one way or the other in relation to the accuracy of such information, figures and projections.include; the development of the major WestConnex road linking the West with the CBD at anestimated cost of $10 billion, the F3-M2 Motorway link, the development of both the Moorebank Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculationand Eastern Creek Intermodal Terminals, as well as upgrades to Sydney and regional rail or any other information that you rely upon that isnetworks to relieve freight pinch points. contained in the material. © Colliers International 2012.Development, supply and availability of Prime Grade space will be the key driver of Sydney’sindustrial market over the next 12 to 18 months. The current supply and demand imbalancewhich has seen Prime Grade rents increase and yields tighten, is set to continue in the shortterm, before construction starts on the next supply cycle. The current tight vacancy rate ofPrime Grade space is expected to see face rental growth continue for high quality assets. WhileSecondary Grade rents are forecast to remain stable, as economic uncertainty sees tenants ofthese facilities prefer to renew leases rather than incur the cost of moving. The pre-lease marketis expected to see transaction volumes increase, over the next six to 12 months, as the lowercost of debt, a lack of suitable existing facility’s and an increase in Prime Grade rents begin tomake negotiations more flexible.Prime Grade facilities are expected to remain in high demand from both offshore and domesticinvestors, over the next 12 months, driven by the risk and return profile of these assets. Strongdemand combined with a lack of availability, low government bond rates and softer borrowingcosts are expected to see Prime Grade yields tighten, by at least 25 basis points, over the nextsix months. Risk averse buyers are expected to see soft demand for of Secondary Grade assetscontinue. However, opportunistic buyers are forecast take advantage of the tight Prime Grademarkets and acquire these assets at competitive prices and reposition, to capture the capital Accelerating success.growth upside.www.colliers.com.au/research