Industry experts are predicting a shortage of storage space for manufacturers and retail businesses in the Australian cities of Sydney and Melbourne in the coming months. Both cities experienced high levels of container imports in February -- import levels that were more in line with what used to be considered normal in pre-recession Australia. For Sydney, February was the fifth straight month of record imports, according to Saturday's Sydney Morning Herald. And in Melbourne, imports have just begun to reach the level they were at prior to the onset of the global financial crisis.
When industrial storage space is in short supply, it is not unusual for smaller businesses to turn to self storage facilities to meet their storage needs.
Reporting on a new market review by CB Richard Ellis (an international real estate services company), the Sydney Morning Herald predicted Saturday that manufacturers and retailers would need space in which to store newly imported goods. As a corollary, the Herald suggested that rental rates for Australian storage warehouses might rise in the next few weeks.
"The more we buy locally, the more we import and this equates to more storage space being required," CB Richard Ellis' regional director of industrial and logistics services, Joshua Charles, told the Morning Herald. "With Sydney Ports recording a 25.4 percent increase in container traffic on this time last year, both landlords and tenants should be taking note. If you are a tenant with plans for growth, the cessation of industrial development since the beginning of the GFC [global financial crisis] means opportunities will be limited, at least for the next 12 months." Charles predicted that tenants and prospective tenants would have to be more aggressive about searching for storage space as the demand for storage rises.
"For landlords, this means that the slightly elevated incentive levels offered to new tenants over the past 18 months should begin to retreat," he predicted. "While there may not be immediate rental growth, the good news for owners is that any vacancies will not be empty for long. Competition for A-grade warehousing space is most definitely building."
Colliers International executive Adrian Balderston agreed with Charles, noting that the number of leasing inquiries related to industrial warehouse space in the southwest had been increasing of late.
"Only six buildings measuring more than 10,000 square metres are currently available in the southwest...and the majority of these facilities are suited to warehousing only," Balderston told Morning Herald reporter Carolyn Cummins.
Meanwhile, ratings agency Moody's Investor Services said in its own report (also covered in Saturday's Sydney Morning Herald) that the supply and demand for storage in the Sydney and Melbourne areas are now "well-balanced."
Australian industry experts have been predicting an increased demand for storage from a range of retail businesses, ranging from clothing to beverages to auto accessories. Some companies, such as Harvey Norman, FKP, and the Goodman Group have been buying warehouse space in Sydney and Melbourne as an investment, to prepare for the expected surge in demand this spring. Some manufacturers and retailers have already begun leasing extra space. Fryer Beverages has signed a six-year-lease in Kingsgrove, and steel roofing and wall construction specialist Fielders Australia has just signed a ten-year-lease in Minto.
Sources used:
"Companies on the hunt for storage but sites in short supply." The Sydney Morning Herald. April 3, 2010.
Cummins, Carolyn. "Demand for storage is building." The Sydney Morning Herald. April 10, 2010.