Three Australian cities in list of world’s 10 most expensive warehouse rental markets: CBRE

Sydney has ranked as the sixth most expensive place in the world to rent prime logistics warehouse space with Brisbane ranking eighth and Perth in 10th place.

The rankings are based on equivalent US dollar per square foot comparisons with Tokyo ranking first (US$21.33 per square foot) just ahead of London (US$20.32 per square foot). 

The average cost per square metre for prime logistics space in Sydney is US$12.59 per square foot, $11.74 per square foot in Brisbane and $11.02 per square foot in Perth. 

Logistics space is generally purpose-built modern warehouse space that has been specifically developed for storage and distribution purposes and often built to meet the specifications of a certain company or industry.

While they may be unglamorous, featureless buildings on the outskirts of the city, high yields and low vacancy rates among prime assets have made them a popular investment choice. 

This week ASX-listed commercial property group Dexus acquiring a large industrial property in Brisbane’s southwest for $21 million after a sales campaign that generated a higher than expected level of interest.

The sale of 13,315 square metre industrial facility at 131 Mica Street in Carole Park, negotiated by Simon Beirne and Troy Whalan of Colliers International, following an expressions of interest campaign that eventuated in 11 offers.

The vendor was Wesfarmers subsidiary J Blackwood & Son Pty Ltd and the property was sold via a sale and leaseback, with Blackwoods taking on a 15-year lease for the facility plus options for a further ten years, assuring Blackwoods of continued access to this excellent location.

Whalan said that last year was the best year on record for Colliers International in the industrial property market and 2013 is expected to be even better.

While occupier demand in Sydney remains cautious, the report highlights that a strong preference still exists for good quality, well-placed logistics space. With vacancy levels low for such stock, pre-commitment activity has been prevalent, helping to boost prime rents during the final quarter of 2012.

CBRE regional director of industrial & logistics services, Joshua Charles, says the vacancy rate for existing A-grade faculties in the major Australian markets was the lowest it had been in a decade which was helping to support rental increases.

“Incentives on prime logistics facilities are now back to pre-GFC levels,” Charles says.

“Many large retailers are re-organising their distribution networks to incorporate 40,000 square metre to 80,000 square metre ‘mother ship’ distributions hubs in each state which is helping drive new construction. In this environment, developable land has become highly sought after by industrial A-REITs, who are looking at opportunities to speculatively building warehouses to get their jump on competitors.”

Charles forecasts additional – albeit slight – growth in rentals in 2013 and a further increase in speculative construction.

“The high Australian dollar has increased the need for local warehousing as importers ramp up their buying and, by extension, their need for storage,” he says.

However, he noted that e-tailing was not having the massive direct effect that many believed.

“Instead, third party logistics groups are picking these up as additional contracts that require more storage space,” he says.

This article first appeared on Property Observer.