Motorway access drives rental shift in Sydney’s industrial powerhouse market

Sydney, 12 February 2017 – Proximity to key transport routes is emerging as one of the key priorities for industrial occupiers, with new research showing each additional minute drive closer to a motorway equates to a 2.1% spike in rents.

CBRE’s latest ViewPoint ‘Time to motorway drives rental savings’ highlights the relationship between drive time to motorways in Western Sydney and gross rents.

An analysis of 375 industrial leases since 2014 in the Western Sydney area revealed that for each additional minute drive to a motorway, occupiers pay on average $3 per square metre more. As facilities move further from the motorway, rents dropped in all Western Sydney submarkets.

CBRE’s James Melville said the findings reflected the growing importance on supply chain efficiencies amid the increasing geographic division between consumption and production.

“Factories have become more specialised and separated from the warehousing and retail stages of the supply chain. This fragmentation has resulted in a greater importance of supply chain considerations on locational decisions,” Mr Melville said.

With transport costs typically a large share of an industrial operation’s cost base compared to rental costs, industrial occupiers can making savings by locating themselves nearer to key infrastructure.

“Many occupiers will pay a rental premium for more savings elsewhere in their supply chain, with accessibility being one of these key considerations,” Mr Melville explained.

“Much of Sydney’s large-scale warehousing logistics operations have shifted west towards precincts such as Eastern Creek, which have excellent access to the road network and, by extension, Sydney’s residents.”

The report shows supply chain intensive occupiers can benefit from greater transport related savings that offset the more minor increases in real estate costs by being closer to motorways.

“For an occupier assessing their location options, a 1% drop in transport costs is equivalent to a 10% drop in rental costs,” Mr Melville said, adding that this contributed to occupiers’ willingness to pay a rental premium for properties nearby motorways.

The report also references CBRE’s recent Industrial Occupier survey, which highlighted access to road network as the most important location-specific factor for site selection out of 19 factors overall – second only to loading access.

CBRE’s Nathan Egan said the growing focus on location was driving occupiers to pay significant rental premiums for the right facility in the right location.

“In 2017, Coles leased a warehouse in Alexandria for use as a dark store. This lease was struck at a higher rental due to the unique location and site specific features. This was the only available facility in the market which met each of these key criteria for Coles,” Mr Egan said.

“Access to road networks provide connectivity, which enables speed to the market, helping businesses meet service expectations and lower transport costs related to distribution.”