This article is from the Australian Property Journal archive
ESR Australia has snapped up one of the last remaining large-scale industrial sites in South Sydney for $143 million, with plans for a new $300 million multi-storey warehouse in the tight market.
The 48,000sqm site at 49 Stephen Road in Botany, which is currently home to global leader in industrial coating resins, Allnex, was purchased in a sale-and-leaseback deal and will become home to the company’s first multi-storey logistics facility.
In line with its strategy, EADP II will re-develop the site into a core logistics estate, with plans to invest a further A$300 million to deliver the circa 58,000sqm of GFA.
“ESR Australia is pleased to secure an infill site of this scale in the highly sought Botany Bay Precinct,” said Phil Pearce, CEO at ESR Australia.
“The strong demand for space with the precinct and site’s planning overlay will enable us to explore multi-level warehousing on the site.”
The property currently has planning controls with no floor space ratio (FSR) or height limits, providing a significant opportunity for redevelopment.
One of the country’s first multi-storey logistics assets, with the Vaughan Construction-delivered LaSalle Investment Management’s Portal development in Matraville, recently secured its first pre-lease, while construction recently got now underway on Charter Hall’s first multi-level warehouse, Ascent Logistics Centre in Alexandria and
South Sydney boasts proximity to Port Botany, Sydney Kingsford Smith Airport, and major arterial road networks.
Knight Frank data shows 547,748 sqm of industrial space is currently available across the capital cities of eastern Australia after a 56% drop in availability over the whole of 2022, and vacancies remain at record lows.
The increasingly tight market has pushed national prime existing industrial rents up by 24.8%, the strongest annual growth seen in 34 years, JLL says.
While a recent report from Colliers found that Western Sydney has just 2.7 years’ worth of developable industrial land supply remaining.
The purchase will see Allnex enter a five-year leaseback, enabling plenty of time to ensure ESR time to obtain all necessary planning approvals and for Allnex to find alternative sourcing routes in close alignment with its customers.
“Allnex recognises the shifts within the Australian surface coatings market, both geographically and technologically, and is proactively taking measures to ensure the continuity of our operations,” said Zel Medak, VP of commercial Southeast Asia, Australia, and New Zealand at Allnex.
“We are pleased to reach an agreement with ESR to ensure minimal disruption and to continue to provide our customers with high-quality and innovative products.”
Trent Gallagher and Michael Crombie from Colliers managed the sale.
“This is a very strategic acquisition for ESR as it allows them to get a foothold in the most sought after and tightly held industrial market in the country. This key transaction in the market showcases the evolution and bright future of multi-level logistics, particularly within South Sydney,” said Gallagher,
“Rarely do we see such a strategic parcel of industrial land of this size within South Sydney, and the market’s strong response was testament to the scarcity of the asset. Given the investment yield for five years and continuing rental growth, it’s clear this purchase will undoubtedly prove to be a fantastic long term move for ESR,” added Crombie.
The project will bring ESR Australia’s national development pipeline to $7.9 billion.
