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Western Sydney commercial real estate tapering for state election

February 17, 2023

After starting 2023 with a flurry, the looming 2023 NSW State election on Saturday, 25 March, is contributing to a tapering of commercial property activity in southwestern Sydney.

Daniel Krobot, Managing Director of Raine & Horne Commercial Macarthur, “Generally, state elections don’t seem to impact commercial property activity or enquires, and perhaps to a degree, some small business owners are delaying decision making until there’s a clearer view of our next government in NSW.”

Daniel reports regional yields are about 5.0% for retail and office space, dipping to 4.0% across the industrial market. 

Notwithstanding the minor tapering, industrial property remains the boom property type across the Macarthur area, despite a limited amount of stock for sale and lease.

“There’s still plenty happening in the industrial market, but we just don’t have enough property to meet our leasing or sales enquiries,” Daniel said.

“Vacancies for industrial are virtually zero, while there’s just no land around for sale.”  

By way of comparison, vacancy rates are higher for other property types – around 5.0% for office space and 10% for retail property.

According to Daniel, the Macarthur region remains a popular destination for businesses because of its outstanding transport connectivity. “The Hume Motorway delivers you to Canberra in 2.5 hours. There is also great access to Wollongong and Melbourne, while the M5 can have you in Sydney in under 1 hour.”

The squeeze on industrial land is impacting affordability, which is good news for lessors. “Macarthur commercial property has generally been affordable compared to the rest of the Western Sydney market,” said Daniel.

“A few years ago, a 5,000 square metre warehouse would have leased for $100 - $110 sqm. Now they’re pushing up to $170 - $180 sqm. This is a significant uplift, with no supply, making it hard for small and medium sized businesses to secure new properties.

“Consequently, small businesses are jammed in older premises or must spread their operations across several locations. 

He continues, “I have been working with one logistics client looking for 7,000 – 8,000 square metres for two years. 

“They are trapped in their main 3,000 square metre shed and are leasing multiple small sheds as overflow, which is inefficient.”

He adds, “Small businesses now need to plan 24 months-plus prior to a move to new premises.

“Until we see some of that land around the new Western Sydney Airport come online and around the Mamre Road precinct, we will continue to have issues with supply.”