The Employment Lands Development Monitor (ELDM) provides commentary on the Economics, Demand and Adequacy of employment lands.
The Economics of Employment Land section discusses trends and factors impacting the demand for employment land in Greater Sydney. This section also highlights the role and contribution that employment lands make to the wider Sydney and NSW economy.
Demand or Take-up of employment lands is tracked and reported for Greater Sydney, the Central Coast, the Hunter Region and the Illawarra-Shoalhaven Region. Take-up measures the development of zoned employment lands and is an indicator of the health of the economy, and demand for business and industrial services.
To estimate the adequate supply of employment land in Greater Sydney, the ELDM tracks the stock of employment land at progressive stages in the planning and development process and estimates the supply of employment lands at different take-up rates.
Employment Land (lands zoned for industrial or similar purposes, and business parks) plays a crucial role in the functioning of the city. The need for employment land, in sufficient quantities, and adequately distributed throughout the city will continue to play an important role as Sydney grows.
Sydney’s employment land supply provides a suitable location for:
Employment lands contribute to the economy of the local area, Greater Sydney and NSW as a whole. In 2016 it was estimated that employment lands in Sydney provided around 506,500 jobs and generated around $280 billion of output (see Figure 1 below).
|Developed Hectares||Jobs||Gross Output ($B)||Gross Output / Job||Gross Output / Hectare ($M)||Jobs / Hectare|
|Central City District||3,410.6
|Eastern City District||1,450.1
|Western City District||1,450.1
Source: REMPLAN Economy 2017; ELDM 2018
All figures and data attributable to REMPLAN Economy are based on data sourced from the Australian Bureau of Statistics (ABS), most of which relates to the 2016 Census. REMPLAN’s estimates of output are based on the Australian National Accounts and disaggregated into regions using an input/output methodology.
The Western City District has the largest percentage of developed employment land, accounting for 36 per cent, while the North District has the least with around 5 per cent of total zoned and developed employment land in Sydney. While most zoned and developed employment land is located in Western Sydney, jobs and output generated are relatively evenly distributed across Sydney, with 44 per cent of jobs and 44 per cent of output generated in the Western Sydney.
Output per job doesn’t differ greatly across Sydney with gross output per job in Eastern Sydney being around $545,400 and in Western Sydney around $562,600. However, as jobs in employment lands are much denser in the eastern and northern part of Sydney, jobs per hectare varies greatly, which results in large differences in the output generated per hectare.
The current strength of the NSW economy is influenced by the strong labour market, a large pipeline of public infrastructure projects, and record low interest rates. Domestic economic strength forms the basis of underlying demand for industrial property and any deterioration in these economic conditions is likely to impact the rate of growth in business formation in Sydney’s employment lands.
Property analysts indicate that Sydney’s industrial market remains strong – underpinned by domestic and international demand factors; and buoyed by recent falls in the Australian Dollar. There is solid demand for industrial space which is being driven by strong economic conditions and ongoing structural changes in the retail sector where businesses are adjusting to the increase in e-commerce. Retailers, wholesalers and logistics operators continue to strive for increased efficiencies which a focus on optimisation of last mile delivery and automation of distribution centres.
This structural change is reflected in the spatial distribution of the industrial development approvals and the location of land take-up in Sydney over the past few years.
The recent strength of the Sydney economy has contributed to increased household spending on homewares including appliances, furniture and hardware supplies. Demand for industrial warehouses to supply these products to the market remains strong and is likely to continue as domestic economic strength underpins retail spending.
The depreciation of the Australian Dollar in recent years, in addition to an improving global environment are driving export demand for services and to a lesser extent domestically manufactured goods. Despite Australia’s manufacturing sector declining over the past decade, there has been growth in some sub-sectors, like advanced manufacturing and food manufacturing, which generally require a higher skilled workforce.
Demand for land for new large developments continues to be concentrated to areas around the M4 and M7 interchange in Western Sydney where land is available, cheaper and has easy access to road transport links for shipping goods across Sydney and NSW. Space and price considerations give Western Sydney’s industrial land a comparative advantage over other parts of Sydney.
Western Sydney also has large undeveloped sites providing businesses with the flexibility to diversify away from local manufacturing into import and distribution models which require large floor plates and adequate hardstand circulation area for truck movements.
Undeveloped employment land in the eastern areas of Sydney is very constrained with demand exceeding supply in some areas. Demand continues to favour smaller, unit type development for business and service style users.
Employment land has evolved beyond only servicing the local population, with uses such as panel beaters, household trades and council depots, but also services that contribute to the functioning of the strategic centres such as data centres, print shops and concrete batching plants. In addition, high demand for land for residential development has resulted in ongoing loss of employment land stock in Eastern Sydney. Competing land use issues are discussed further in the loss of employment lands section.
Sydney’s industrial land market competes for businesses with other major Australian cities. Businesses that require access to deep labour markets and leverage off existing port, rail and road infrastructure can choose, to some degree, between Australian major capital and regional centres.
Businesses are driven by costs. If the cost of operating, including labour costs and rents, becomes too expensive in one metropolitan area, business may relocate to other locations. The inter-regional comparative attractiveness of industrial centres will become more important as businesses increasingly move online and efficiencies in logistic operations make geographic distance between product and consumer a less pressing issue.
In particular, major national offices or national distribution facilities are increasingly less tied to one physical location. More expensive rents, and site suitability may cause businesses to look elsewhere for industrial space outside of Greater Sydney. Industrial land prices and rents in Sydney are higher than other Australian capitals (Figure 2). This is a sign of strong economic fundamentals within Sydney and highlights the growing demand for industrially zoned land.
||Prime Grade||Secondary Grade|
Source: Colliers International 2017 – Net Face Rents ($/SQM H2 2017)
Investment in warehouse facilities continues to grow in response to market demand. Over the 2017 calendar year, investment in warehouses made up $3.3 billion or 88 per cent of Metropolitan Sydney investment in industrial building. Warehouse investment was the major category of industrial building investment in all Greater Sydney’s 5 districts – Figure 3.
|Sydney Metropolitan Area||88%|
|Central City District||86%|
|Eastern City District||65%|
|Western City District||91%|
Source: ABS Building Approvals
The trend of increasing investment in warehousing has been evidenced over the past decade – driven by increasing automation in warehousing, innovation in logistics and the rise of e-commerce. There is increasing market demand for larger lots to accommodate large-format industrial users that need access to existing port, rail and road infrastructure. Figure 4 below shows the increase in industrial building approvals, split by the value of warehousing approvals and everything else (including factories) over the past 5 years. The figure shows the stark increase in warehouse investment across Greater Sydney.
This trend is expected to continue as these underlying changes to activity in the transport, storage, warehousing and manufacturing industries continues to occur. Industries and businesses that manufacture or assemble finished goods are expected to continue to grow, but in high value add, “advanced” segments of the market. These businesses often demand facilities that have smaller physical footprints and may find suitable accommodation in existing buildings and structures built for heavier manufacturing that has moved offshore.
In 2017, 91 per cent of industrial building approvals in Greater Sydney was for warehouses. This reflects the ongoing structural changes occurring in the retail sector influencing supply chain management.
Factories remain a small part of the demand story with the manufacturing sector in Australia now being driven by high tech research and development, production of niche components, and the production of perishable items. Traditional manufacturing of everyday products such as cars and whitegoods are much cheaper to produce overseas and to import and distribute across Australia, explaining the growth in warehouse demand over factories.
The future use of employment land will continue to change with technological advancements, globalisation and Australia’s role in the world economy. It is forecast that:
Investment by the NSW Government in road and rail infrastructure and by the Federal and NSW Government for the Western Sydney Airport, will act as a catalyst for the take up of employment lands in Western Sydney.
The Employment Lands Development Monitor (ELDM) measures demand by tracking take-up (development of previously undeveloped land) in all B5 Business Development, B6 Enterprise Corridor and B7 Business Park zoned land, in addition to all industrial zoned land, under the Standard Instrument Local Environmental Plans; and Special Use zones in the Hunter and Illawarra-Shoalhaven Regions.
The ELDM has continuously measured take-up in Greater Sydney since 2008 and the Central Coast since 2010 within Employment Land Precincts. As this is the second year that the Hunter Region has been included in the program, a take-up figure can be reported for the first time in 2018.
Demand for employment lands is further tracked at an LGA level using Australian Bureau of Statistics Industrial Building Approvals data.
The value of industrial building approvals in Greater Sydney was around $3.75 billion in the 2017 calendar year. This was a significant increase on 2016 when $1.95 billion worth of industrial development was approved and $1.6 billion in 2015.
The majority of building approvals by value (88 per cent) were for warehouses, with factories accounting for 6 per cent of approvals and the remainder being other industrial and agricultural and aquacultural buildings.
The value of warehousing approvals in the Western City District was the driving force behind the strong approvals figures, with 64 per cent of all industrial building approval value falling within this category.
(Source: ABS Building Approvals)
Take-up of employment land for industrial development was 140 hectares in 2017. This compares with 171 hectares in 2016 and 105 hectares in 2015. The majority of the land take-up (96 per cent) occurred in Western Sydney* including 95 hectares in the Western City District.
Take-up activity was concentrated in the precincts of Erskine Park (19 hectares), Mamre West (15 hectares), Eastern Creek (15 hectares), Warwick Farm Racecourse (13 hectares), Yarunga/Prestons (12 hectares) and South of Sydney Water Pipeline (10 hectares).
*Western Sydney is defined as the Western City and Central City District.
Source: Employment Lands Development Monitor 2018
In 2017 there was $173 million of industrial building activity approved in the Hunter Region.
This year is the first year of reporting on the take-up of employment land for industrial development. Take-up of employment land for industrial development in 2017 was 174 hectares. This mostly occurred in the Newcastle Local Government Area (126 hectares), followed by Lake Macquarie (14 hectares) and Muswellbrook (10 hectares).
As this is the first year that the Illawarra-Shoalhaven Region has been included in the ELDM, land take-up cannot be measured.
Page last updated: 10/01/2019