CAROLYN CUMMINS September 12, 2009 . GOODMAN GROUP'S closure of its $1.3 billion capital, which was heavily oversubscribed, is a sign that interest is returning to the industrial sector, investors say.
The fund managers who took up the Goodman issue said they believed conditions were showing some signs of improvement, based on the general rise in the economy.
Imports and exports have been rising from a low base, and that has led to some gains in demand for industrial property.
Savills's Sydney Industrial Market Overview shows an increase in year-on-year leasing activity for the year to June 30.
According to the Savills research, industrial leases in Sydney in the year to June 2009 totalled 140, up from 122 the previous year.
Savills NSW divisional director for industrial, Darren Curry, said the year-on-year growth in the face of the global financial crisis had been reinforced by recent leasing activity in Western Sydney.
''A number of new Sydney industrial projects planned to commence in 2009 and 2010 have been deferred due to a lack of funding or the absence of a secure, precommitted tenant,'' Mr Curry said.
Savills has identified 226,814 square metres of gross leasable industrial area currently under construction, with 131,678 square metres already completed this year.
Savills expect 307,876 square metres of industrial space to come on to the market in 2009 in the Sydney metropolitan area. At this stage, Savills forecasts about 122,478 square metres to be added in 2010.
Savills NSW research analyst, Claire Cupitt, said the current economic uncertainty was encouraging a high level of industrial tenant retention.
"Some occupiers have expressed interest in sub-leasing as they struggle to be viable in the current market and many tenants have opted to extend current leases and retain their flexibility, resulting in some expansion plans being shelved," she said.
"Given the sharp decline in supply and the take-up of stock in Western Sydney, specifically in the regions of Eastern Creek and Erskine Park, we expect Sydney's vacancy rate to tighten in the future."
Savills' Sydney Industrial Market Overview shows net face prime industrial rents in June 2009 remained constant at between $125 and $175 per square metre net in South Sydney. In the West, prime net face rents ranged between $95 and $115 per square metre, while on the north shore, rents remained between $120 and $150 per square metre.
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