Savvy investors have been eyeing multi-level warehousing amid high land values and lack of supply in infill markets, with more than one million sqm of potential multi-level warehouse space in Sydney, according to Colliers. 

“Sophisticated capital is increasingly seeking to optimise rents in the context of high land values and lack of supply in infill markets with multi-level warehousing, and Goodman, LOGOS, ESR, Hale Capital Partners and Charter Hall are all currently seeking to construct multi-level facilities,” said Gavin Bishop, Head of Industrial Capital Markets at Colliers. 

“Of the multi-level industrial assets currently marketed for lease in Sydney, net face rents well in excess of $300/sqm are being achieved for up to three levels, and the Qantas lands Colliers sold to LOGOS in 2020, which adjoins Sydney’s International Airport will likely see Australia’s first four to five storey warehousing.  

“While, South Sydney currently represents the epicentre of multi-level warehousing, several sites purchased in 2022 have been earmarked for multi-level development in Sydney’s Inner South West and Central West.  

“The Melbourne market will likely track the success of multi-level developments in South Sydney before looking to roll these out in in areas like Port Melbourne over the next two to three years.” 

The focus on multi-level industrial comes as prime rents were forecast to grow by 30% or more by 2025 in 10 industrial submarkets, led by South Sydney (39.5%), Central West Sydney (36.9%), Outer East Melbourne (36.6%) and City Fringe Melbourne (35.6%).  

A lack of leasing options and robust levels of occupier demand indicated that rental growth of over 30% in certain industrial markets by 2025 was likely, especially since average industrial prime rents increased nationally by almost 19% in the 12 months leading up to the end of September 2022. 

Notable current multi-level warehousing projects due to be delivered within the next five years in Sydney included Goodman’s 45 Burrows Road, Alexandria, Charter Hall’s 520 Gardners Road, Alexandria and Hale Capital Partner’s 42- 52 Raymond Avenue, Matraville. 

Multi-level and larger industrial facilities answer the call for new space with vacancy rates in several Sydney areas under 1%, while also offering substantial occupancy savings as land-tax and Council rates are shared across each level.  

Luke Crawford, Director, Research at Colliers, said with statutory costs accounting for around 55% of total outgoing costs on average, it could result in a large saving to tenants. 

“Larger industrial facilites will help facilitate net take-up for 2023, which we are forecasting will be in the order of 3.2 million square metres nationally, due to the impact of a shortage of leasing options and moderating demand from the retail trade sector as consumer consumption eases with the rise of the cost of living,” Crawford said. 

“With regards to speculative projects, between now and the end of 2023, there is approximately 1.6 million sqm in the pipeline along the East Coast, dominated by the Melbourne market.  

“Of this amount, almost 50% is committed with the bulk of uncommitted space stemming from 2023 likely to be committed closer to completion.” 

Bishop said select developers were not wanting to lease the space months before completion as they believed they were missing out on rental growth, while others were happy to lease the space to provide outcome certainty. 

“Since the substantial speculative pipeline over the next 18 months is far exceeded by the level of active tenant requirements, it is unlikely to significantly impact vacancy rates,” Bishop said.