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Amazon arrival sparks demand for industrial assets

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The pending arrival of the global Amazon group has sparked a rise in demand for industrial property, according to agents.

Amazon has appointed CBRE to find sites for what the group calls "fulfilment" centres, being large warehouse and logistic properties to store the goods bought online in readiness for distribution.

It is expected these will be in regional and outer metropolitan areas, initially in NSW and Victoria, before spreading across the country. Agents say it is is likely the group will also look for smaller sites close to capital cities to have access for the "last mile delivery" services.

LJ Hooker's head of commercial Christopher Mourd said developers had re-invented the sector in the last five years to address the changing economy.

"We've seen somewhat of a new industrial revolution, especially through Sydney," Mr Mourd said.

"With the likes of Amazon planning a major foray into Australia, the industrial sector is attracting major developer activity."

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DEXUS Property Group is another on the expansion path after securing Isuzu Australia Limited and Anmar Group on long-term leases at DEXUS Industrial Estate, Laverton North, Victoria.

DEXUS will develop purpose built facilities across 21,685 square metres for Isuzu Trucks and across 15,720 square metres for Anmar.

The head of industrial development at DEXUS, Chris Mackenzie, said Isuzu Trucks would focus its facility on their Isuzu Care Program, Isuzu spare parts and a technical training centre.

"Construction has already commenced on Anmar's facility, which will include their national head office, showroom, manufacturing and warehouse," Mr Mackenzie said.

"Proximity to major road networks and an available workforce, along with certainty of delivery, were key considerations in the decision to commit to the DEXUS Industrial Estate. Anmar is targeting occupancy in October 2017."

Mr Mourd said construction in Sydney's industrial sector would surge to pre-GFC levels over 2017 in reaction to changing retail habits and the entry of global players including Amazon.

More than 720,000 sq m of industrial construction is planned across Sydney this year, representing a 28 per cent increase on 2016, according to LJ Hooker Commercial's latest Industrial Market Monitor.

The forecast represents continued confidence from developers, who delivered 560,000 sq m of new stock in Sydney in 2016 – a 25 per cent increase on 2015.

Despite the rise in construction, rents were largely stable across the city last year, as net absorption offset the withdrawal of stock for residential repurposing, except in the city's south where prime rents surged 9 per cent to $161 a square metre a year due to a scarcity of stock.

The wave of construction is also continuing in Victoria. Warehouse commitments from major operators including Woolworths, Target and The Reject Shop were set to maintain healthy construction levels. Last year Melbourne attracted about $1 billion worth of development across 500,000 sq m. As much as 100,000 sq m was commenced without a tenant pre-commitment.

Western Sydney's speculative warehouse sector continues to be a boon for developers, with stage one of Charter Hall's M5/M7 Prestons logistics park the latest distribution facility to be fully-committed ahead of completion.

Specialist FMCG distributor BAM Wine Logistics has committed to 10,300 sq m of logistics space on a seven-year lease term within stage one of Charter Hall's M5/M7 Logistics Park. The lease, secured by LJ Hooker Commercial Silverwater director Marcel Elias, is for $1.16 million, equating to $113 a sq m.

Mr Elias said in 2016 not a single speculative development within Western Sydney was completed prior to securing a commitment from a tenant, "which is unprecedented".

"Many tenant briefs are contractually driven, which often does not take into consideration a lengthy lead time, therefore timing has increasingly become a major influence. We see this trend likely to continue into 2017 and beyond," Mr Elias said.