Edmonds Associates Valuers were recently engaged to value a modern industrial strata unit in Artarmon on two separate valuation dates approximately 20 months apart for the purpose of litigation proceedings. The valuation dates for the property were in July 2015 and March 2017. The key challenge for this assignment was to adequately capture the high activity in the Sydney industrial markets during this time frame.
Our research relied upon market investigations of leasing and sales evidence and analysis, interviews with agents and detailed property market information analysis. During 2015 the market saw ongoing downward movements in yields due to limitations of stock and low cost of capital. In the second half of 2015 the leasing market in this property segment experienced limitations of space. Added to that, renewed business confidence due to state infrastructure projects drove rental growth and a reduction in incentives.
This was confirmed by research undertaken by Colliers Industrial Research and Forecasts which stated that “the period between March 2015 and September 2015 was one of exceptional sales conditions, continuing the momentum emerging in late 2014 and surpassing previous sales volumes”. Colliers suggested that “there was a strong surge of investment and vacant possession sales recorded in Sydney industrial market and that the sale volumes were limited only by the availability of stock.”
In analysing market trends for March 2017 we found this trend was continuing. Our further market research confirmed that the supply issues from 2015 have continued into 2017. “Owner occupancy is becoming a significant driver of investment activity in all sub markets” and land is becoming “hotly contested…New South Wales Government data indicates that there is less than twenty years of zoned industrial land, at present absorption rates. Serviced land, which is connected to utilities, is even scarcer, with only three years supply available.. Sharp rises in capital values, over a relatively short term, may encourage some owners to realise gains. Recent sales evidence in the northern market shows that capital value uplift of 20 to 30 per can occur on the back of strong investor demand and diminishing supply levels.” Colliers Industrial Research and Forecasts, second Half 2016.
An example of this was 20 Whiting Street in Artarmon transacted for $2.2 million in December 2014 and recently resold for $2.8 million, an increase of 21 per cent in eighteen months.
In conclusion, low interest rates and the limited amount of industrial land have created a competitive market between owner occupiers as well as institutional and overseas investors. This has created a strong market for the industrial property segment in North Sydney with reduction in between the date of valuation in July 2015 and March 2017 with associated capital growth. Our interviews with local agents active in the area have indicated that the industrial market in North Sydney remains tight. Agents are confident that properties listed for lease will achieve their advertised rents. Sales agents have confirmed that there is strong demand from offshore buyers and owner occupiers competing for limited space
Edmonds Associates Valuers are consistently engaged in business, specialised, commercial, industrial, residential valuation and property consulting assignments. We assist our clients with a broad variety of valuation requirements such as valuations for litigations and dispute resolution, compulsory acquisition, rating and tax and much more. Please contact our office should you have any questions about our services.