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The new industrial revolution

By Ryan Ellem on Mar 27 2017


Industrial landlords and developers stood up and took notice last year when e-fashion specialist The Iconic committed to a distribution space the size of three football fields in Sydney’s West.

The Iconic – backed by companies based out of Germany and Sweden – overlooked the comparative challenge of Australia’s dispersed population centres in favour of the online appetite of the nation’s consumers. Online retail spending surged more than 13% in 2015-16 to eclipse $20 billion. 

The Iconic’s seven-year lease commitment – equating to annual rent of approximately $2 million - comes ahead of the leader in online sales, Amazon, entering the Australian market this year. They’ve reportedly been scouring sites in proximity to Western Sydney’s arterials. 

LJ Hooker Commercial Silverwater Director Marcel Elias, who secured The Iconic lease alongside his co-Principal John Tanna, said demand was high for quality storage facilities with distribution efficiencies throughout Western Sydney’s industrial heartland.

Mr Elias said the repurposing of many industrial sites by residential developers had led to a new wave of speculative development to meet demand.

“In 2016, not a single speculative development within Western Sydney was completed prior to securing a commitment from a tenant which is unprecedented,’’ said Mr Elias. “We see this trend likely to continue into 2017 and beyond as the industrial vacancy rate is near zero in many pockets of the central and outer western suburbs.”

LJ Hooker’s Head of Commercial Christopher Mourd said the network’s leasing agents were tuned in to major operators seeking out space. But he said smaller investors, owner-occupants and other contractors were following the movements of these major players as well, further enlivening industrial pockets.

“These major tenants are reigniting industrial precincts,” said Mr Mourd. “The manufacturers working under the roofs of these industrial facilities started to move out ten years ago, replaced by e-retailers, tech companies and other digital specialists.

“As major employers, they’re also leading a wider rejuvenation in these pockets, encouraging service suppliers to find tenancies nearby; everyone from transport operators to takeaway food providers servicing the new injection of workers.

“It’s important for industrial landlords and owner-operators to understand they don’t need a 30,000sqm asset to be part of the industrial revolution. LJ Hooker Commercial’s sales and leasing agents have the connections to know where the major tenants are looking to establish operations. This insight allows the network to advise surrounding landlords on how they can also position their assets to attract operators servicing the e-retail movement.”

While Sydney and Melbourne’s industrial precincts would initially attract the bulk of initial interest from the e-retail sector, Mr Mourd said Australia’s geographic spread and consumer adoption of technology would result in the sector re-inventing industrial hubs of other capital cities, as well.

“Efficiencies are central in the consideration for location. E-retailers are going to look at somewhere like Brisbane, as the centre of the South East Queensland corner, and think about establishing a base there. Infrastructure provisions such as the future Melbourne to Brisbane Inland Rail will also make the city more appealing to the movement.

“We can also expect to see Perth, Adelaide and also Darwin and Hobart eventually attract these operators as businesses heighten their digital engagement with customers, and distribution efficiencies are sought.”