SHINING THE SPOTLIGHT ON SYDNEY S LAND SUPPLY

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1 COLLIERS RADAR SHINING THE SPOTLIGHT ON S LAND SUPPLY By Sass J-Baleh Research sass.jbaleh@colliers.com Summary There appears to be a consensus view that is facing an industrial land supply shortage This is supported by the fact that some inner sub markets have experienced a rapid decline in undeveloped serviced land since 2010 However in 2016, recorded an increase in undeveloped serviced land, marking an end to the trend of decreasing stock levels. This supply is concentrated in the and sub markets After carrying out a supply/demand analysis we forecast between 6 to 10 years of industrial land supply left. However factoring in potential future employment land areas there is forecasted to be between 14 and 24 years of supply Strong take-up of western industrial land expected to continue, as supported by state planning frameworks, new infrastructure projects, and site/land suitability. Trend There appears to be a consensus view that is facing an industrial land supply shortage. This is supported by the fact that some inner sub markets have experienced a rapid decline in undeveloped serviced land over the past few years (2010 to 2016). Particularly against the backdrop of an increasing number of industrial rezonings (approvals and applications) to accommodate residential and mixed use developments. These rezonings / withdrawals of industrial stock within the inner and middle ring areas is reflected in the following key findings: Historically, the market has experienced the greatest annual rate of decline in undeveloped serviced land, with the annual average rate of decrease at 27 per cent between 2010 and 2016 The Inner market has recorded the fastest annual growth in land development over past two years at 13 per cent, subsequently the stock of undeveloped land has diminished s total stock of undeveloped serviced land has been decreasing as this land has been shifting to developed stock. Submarket and Industrial Land (2010 to 2016) and Land (Ha) and To note: includes precincts with over 5 ha of undeveloped and serviced zoned land Source: ELDM / Colliers International However in 2016, the Metropolitan Area recorded an increase in undeveloped serviced land, marking an end to the trend of decreasing stock levels. This supply increase is concentrated in the Outer sub market, with unserviced land becoming serviced and developable. s Total and Industrial Land (2010 to 2016) and Land (Ha) 1, and To note: includes precincts with over 5 ha of undeveloped and serviced zoned land Source: ELDM / Colliers International

2 w.collie 2RN FORE Greengrove Niagara POPRAN Narara Wyoming BRISBANE WATER Glenworth Leets Lower Valley Somersby Laughtondale Mangrove GOSFO Calga Mount Andrew POPRAN Mangrove Carina Identify and asses which areas have either short, or, medium to Current supply Central Colo Fountaindale Mangrove Never Fail I Killarney Shelly Mountain Gunderman Clare Lower Portland Frederick long term growth potential in accommodating industrial Lower Tascott users. WOLLEMI Ourimbah Bateau Peats Yumbool Pt Ridge Spencer Mount White BRISBANE Brisbane Lisarow Maroota Triangle I WYRRABALONG Forresters Koolewong The NSW Department Wyoming of Planning and Environment in early This is based on the amount of serviced, versus unserviced, WATER BRISBANE Saratoga WATER Terrigal POPRAN Woy Woy Pelican I 2017 Somersby released Broken Head GOSFO an Erina update on their previously known document undeveloped land POPRAN OCEAN Becketts MARRAMARRA St Huberts Island Sackville Wondabyne Kincumber Avoca Woy Woy Employment Kariong Lands Brisbane Development Program, now the Employment Observe the historic trend of land take-up, stock withdrawals/ Blaxlands Ridge Canoelands Daleys MacMasters Cheero BRISBANE Sackville Ettalong DHARUG Lands WATER Development Monitor (ELDM). The ELDM provides additions, future/planned industrial zoned areas (by sub Stanley Milson I 40 Umina Kurrajong Maroota Spencer Woy Woy Killcare BOUDDI Ebenezer quantitative data Ettalong on the current and projected stock level and market) to determine the movement/demand for industrial Kurrajong Kurrajong BOUDDI Glossodia Spectacle I Comleroy Umina Wheeny Pearl The Slopes Box Head 0 5 km Dangar I Broken location of industrial Broken Tennyson zoned land (i.e. IN1-IN4) and business parks users and space moving forward. Lagoon Long I Cattai Patonga Box Head Brooklyn Kurrajong CATTAI Broadwater Glen Wilberforce Lion I across the Kurmond Metropolitan Area. The location of current Swamp and Bushells Lagoon According to the ELDM there is currently 13,576 hectares of Frenchmans CATTAI Reach Juno Pt Fiddletown planned supply of industrial land is also shown. This allows for the Barrenjoy Head HAWKESBURY industrial zoned land. The share of this supply by sub-market Head is Richmond Bakers Pitt Bowen Lowlands Lagoon Town Mountain following: Pitt Town Lagoon Cowan Maraylya shown in the diagram Berowra below. Berowra Grose Cornwallis Pitt SCHEYVILLE Glenorie s Palm Town Scheyville 30 Coasters Richmond Bottoms Retreat RAAF Base Measure the adequacy of supply to accommodate/support Whale BLUE Grose Wold Richmond As seen in Arcadia the map, industrial supply is concentrated in the ern MOUNTAINS Clarendon Windsor Cottage Institute of TAFE McGraths industry growth (demand-supply gap analysis) Morning Agnes Mulgrave Berowra Avalon Banks ern Oakville and markets. Lovett Windsor Scotland Clareville Island Yarramundi Mt Elvina Bligh Box Kuring-gai KU-RING-GAI CHASE Middle Church Bilgola Nelson Dural Galston Newport John Morony Vineyard Correctional Londonerry Centre Windsor Downs view Annangrove Kenthurst Mona Mt Colah Mona Berkshire Castlereagh stone Rouse Terrey Ingleside Warriewood BAULKHAM Dural Winmalee 20 PITTWATER NORTH WE HILLS Asquith Turimetta Head Marsden Beaumont GARIGAL Yellow Turamurra Elanora Narrabeen Rock Glenhaven Austlink HORNSBY Wahroonga Shanes Kellyville Kellyville leigh NORTH Waitara Cranebrook Ridge Narrabeen Lakes Narrabeen Penrith Lakes Stanhope Normanhurst Wahroonga Scheme Gardens Llandilo Cherrybrook KU-RING-GAI GARIGAL Belrose Colebee lea Prison Thornleigh Warrawee Collaroy Warrimoo Willmot ern Bella Castle Plateau lea Shalvey Collaroy Institute of TAFE Quakers Cromer Vista Turramurra Mt Hassall St Ives Acacia Glenwood Oxford Falls view Emu Grove Dean Cambridge Lethbridge Gardens Davidson Long Reef Pennant Gardens Blackett Norwest Kings LANE Narraweena Emu Plains Werrington Oakhurst Blaxland Kings Langley Beecroft COVE Beacon Prison Farm Pymble Emu Plains County Tregear Dharruk Pennant Frenchs Marayong Cheltenham Gordon PENRITH Cambridge Killara Dee Why St Marys Glendenning Baulkham Turramurra ville WARRINGAH Werrington Plumpton Lalor Woodcroft Allambie Epping Whalan Brookvale Curl Curl St Marys Mount Killara Dee Why Head Rooty Doonside GARIGAL Jamisontown Druitt Leonay Kingswood Pymble Roseville Manly Killarney Curl Oxley Manly BLACKTOWN Seven Rocks Chase Reservoir Curl ern Epping University Manly Glenbrook Winston Carlingford Castle Cove 10 Regentville Lapstone Claremont Penrith Roseville Meadows mead The Old Kings Chatswood Balgowlah Colyton Minchinbury Toongabbie Toongabbie School Arndell Parramatta Telopea Fairlight BLUE Dundas wood Denistone Middle Cove Seaforth MANLY Glenmore Valley Ryde Chatswood Balgowlah ern Oatlands Chatswood Castlecrag MOUNTAINS St Orchard Huntingwood Dennistone Denistone OUTER WE WILLOUGHBY Clair Girraween Dundas Clontarf Pendle mead Ryde Lane bridge The Harbour Ryde Cove Spit Military Prospect PARRAMATTA RYDE Reserve Wentworthville Rydalmere Ermington LANE Artarmon HARBOUR Meadowbank COVE St Leonards Department Erskine Cammeray Prospect Greystanes Mays Harris Gladesville view Crows Head of Wentworthville Rosehill wood Nest Middle Head Reservoir Putney MOSMAN Correctional Defence Rhodes HUNTERS Wollstonecraft Cremorne Head Centre HOLROYD Silverwater Longueville Neutral HILL NORTH Merrylands Granville Watsons Mortlake Henley Woodpark Newington Homebush Woolwich Cremorne Horsley Waverton Taronga Wetherill Cockatoo I Zoo Guildford AUBURN Cabarita Goat I Kirribilli Mulgoa Lidcombe Chiswick Drummoyne 20 Abbotsford Harbour Tunnel Vaucluse Granville Birchgrove The Concord Homebush Wareemba Bossley Guildford Rocks Garden Shark I Balmain Island CSIRO Mt Vernon CANADA Old 10 Rodd Rozelle Prairiewood BAY Five Rose Research Yennora Guildford Pyrmont Piper Homebush Dock Darling Station Woolloomooloo Dover Kemps WE CENTRAL INNER WE Berala Pt FAIRFIELD RATHFIELD Bellevue McGarvie Smith Abbotsbury Regents Rookwood Veterinary Farm Glebe Ultimo Darlinghurst Double Wallacia Luddenham Wakeley Chester BURWOOD Badgerys Leichhardt Paddington Carramar Bondi Edensor St Johns Croydon Surry Annandale WOOLLAHRA Canley Villawood Sefton ASHFIELD TASMAN Bondi Potts Burwood Summer Bondi Cecil Petersham Camperdown Redfern Bonnyrigg Cabramatta Bass Birrong Chullora Eveleigh Junction Cabramatta Lewisham Newtown Queens Cecil Lansvale Moore Lansdowne Croydon Bonnyrigg Mt Ashbury Enmore Erskineville loo WAVERLEY MARRICKVILLE Tamarama Chipping Yagoona Greenacre H Hoxton Pritchard Norton Dulwich Alexandria Green Heckenberg Campsie St Peters Lake Zetland Clovelly Airport Valley Mt Hurlstone Randwick Ashcroft Lewis CANTERBURY Sydenham Kensington SEA Silverdale Middleton Warwick Chipping Bankstown Belmore Hinchinbrook BANKOWN Wiley 10 Rosebery Grange Sadleir Farm Tempe Kingsford Airport Coogee LIVERPOOL Norton Lakemba Earlwood Mascot Condell lakes RANDWICK Greendale Cartwright Lake Moore Punchbowl Turrella Daceyville Austral Hoxton Roselands Bardwell Coogee Hoxton Kingsford Smith Milperra Padstow Kingsgrove Bexley Rossmore Lumea wood Pagewood Airport Bringelly Moorebank Prestons BOTANY Maroubra Horningsea Beverley Berala BAY dale Narwee ROCKDALE Hammondville Revesby Botany Casula Bexley Anzac Brighton Banksmeadow Wattle Panania Le Sands Matraville Range Voyager 20 Kogarh Grove Edmondson Picnic Peakhurst Revesby Penshurst Long HURVILLE Boora Pt Pleasure Monterey Port Correctionl Padstow Mortdale Allawah Carlton Centre GEORGES Botany Leppington Ingleburn Sandy RIVER Phillip Malabar Denham Hurstville Ramsgate Court Military Lugamo Oatley Hurstville Kogarah Botany Little Alfords Grove Camp Links Carss Sans Kyle Succi SOUTH WE Holsworthy La Perouse Fields Cobbitty Blakehurst Dolls Towra Pt Inscription Pt Farms Theresa Illawong Kangaroo Cape Banks Catherine Como Oyster Sandringham BOTANY Field Varroville BAY Ingleburn 30 Menai Bonnet Oran Bangor Kareela Sylvania Quibray Bow Long Sylvania s Jannali Taren Kurnell Bowing Raby St Farms Kearns Andrews Woolooware Harrington Barden Kurnell Peninsula Ridge SUTHERLAND SOUTH Brownlow Ellis Eschol Minto Minto Smeaton Lucas Kirrawee Miranda Caringbah Orangeville Farms Lane Eagle Grange Doughboy Head Kirkham Woolooware Bate Camden Loftus Gymea Aerodrome Claymore Yowie Narellan Narellan Yarrawarrah Blairmount Cronulla Woodbine Leumeah Grays Burraneer Dolans Farms Grasmere Blair Kentlyn Lilli Mount Athol CAMPBELLTOWN Holsworthy Engadine Pilli Annan Mt Hunter Spring Ruse Port Hacking Pt ern Farm Mount Annan 40 Military Maianbar Botanic Gardens Glenmore Bickley Reserve Heathcote Share of Total Industrial Land (2016) Glen Bradbury Camden Industrial Zoned Alpine Land Ambarvale Airds HAWKESBURY GREAT 70 Bargo SILVEALE BURRAGORANG MUGOA Wheeny SPRINGWOOD CALEREAGH BELLS CALEREAGH THE LINE OF ROAD Proposed KURRAJONG THE BLACKTOWN MAMRE ERSKINE Camden Menangle Rosemeadow St Cawdor Helens Elizabeth HEATHCOTE 24% Macarthur Agricultural Gilead % Institute Menangle ROYAL Lake fall Woronora Wedderburn Razorback % REMEMBERANCE Picton Douglas Inner % Maldon 60 Appin % MENANGLE RICHMOND PUTTY A Total B C D E WOLLONGONG 100% Darkes Stanwell Tops F Stanwell Maddens Wilton Plains Grose WOLLONDILLY PICTON -NEWCALE DWY Sub-Market ELIZABETH REMEMBERANCE DWY WILTON Badgerys THE ENTRANCE MENANGLE THE GEORGE Castlereagh BYPASS GREAT VALLEY Motorway WAY NARELLAN M4 Channel RICMOND MACQUARIE APPIN (Hectares) Kemps APPIN CARLISLE AVE BULLI-APPIN Colo Bow WILBERFORCE ern GARFIELD VALLEY Bowing RICHMOND CAMPBELLTOWN ROOTY HILL Stokes WALGROVE COWPAURE WE O Hares WELINK M7 ELIZABETH WAY O Hares Bunbury Proposed GARFIELD EA GREAT Pipeline WELINK M7 Curran Channel Rail RESERVOIR SOUTH CABRAMATTA THE Link SUNNYHOLT Cattai HORSLEY Woronora CUMBERLAND WISEMANS OLD IVE Prospect HEATHCOTE Share of Land % Outer % Central % MOOREBANK AVE FERRY Cattai NEWBRIDGE PRINCES HEATHCOTE SOUTHERN WOODVILLE HENRY LAWSON OLD M2 HEATH WISEMANS NEW COTE Woronora OLD HENRY Helensburgh Helensburgh CHURCH OLD Pipeline MILPERRA ILLAWARRA Otford LAWSON 7% CALE FERRY GALON NEW HILL ALFOS POINT BANGOR Hacking ARCADIA LINE PENNANT 18% DAVIES SILVERWATER HILLS PRINCES SIR VICTORIA BYPASS Proposed FORE BERTRAM EVENS M5 BAY LANE KING Berowra CONCO COVE THE BOULEVAE Parramatta CANTERBURY GEORGES Lane Parramatta 3% PARRAMATTA CREEK KINGSWAY Source: Colliers International Cove M2 BEXLEY PORT HACKING VICTORIA Port Berowra BEROWRA TAREN PT Cockle PRINCES 12% RYDE LYONS ROCKY POINT WATERS FERRY WISEMANS NEWCALE KINGSWAY 13% VICTORIA BAY THE GRAND PDE Hacking Rail MONA PRINCES Link Lane Cove Tunnel 23% Cowan GORE NEWCALE WARRINGAH HILL VALE PEATS GAENERS RIDGE CROSS SOUTHERN WAY MILITARY ANZAC Mullet Middle McGARRS ALISON WAKEHUR WAKEHUR SPIT Port PDE AVOCA MONA Patonga WARRINGAH PKWY ANZAC PDE Central Inner CREEK WAY Harbour Jackson SOUTH HEAD WISEMANS FERRY VALE PITTWATER NEWCALE PITTWATER Pittwater see Central Coast Region inset BARRENJOY MANNS Outer Lisarow

3 vs There is currently of undeveloped serviced land, and 2,5 ha of undeveloped unserviced land in. land that is serviced has greater scope to accommodate users in the short to medium term i.e. these lands have lead-in water and wastewater infrastructure available for connection. It is important to note that total undeveloped land may overstate actual supply. land does not equate to potential developable land, as land required for roads, infrastructure requirements and environmental considerations is not deducted from total area size. Industrial Zoned Land Developed vs. (2016) Land (Ha) 3,0 3,000 2,0 2,000 1,0 1, Developed and and Total Industrial Land in 2010 Outer Central Inner To note: undeveloped and serviced refers to current industrial lands where sewerage / portable water service may be available for connection based on Source: ELDM / Colliers Sub-Market Outer Precinct Area (Ha) Catherine Fields % Future Industrial (Camden LGA) % Future Industrial (Liverpool LGA) % 1, % Lowes % Lowes /Marylands % Marylands % Glen Lee (Camden) % Glen Lee (Campbelltown) % Kemps % Rossmore % Moorebank Defence Lands % ern Employment Area Extension ern Employment Area Extension % 4, % Total Metropolitan Area 6, % Non-Industrial Zoned Non-industrial zoned areas that also permit some industrial activity should also be considered when assessing adequate land supply. These zones include the following, and can add up to 15-20% to the total pool of industrial zoned land in : B5 Business Development B6 Enterprise Corridor B7 Business Future Employment Land Land Release Areas The table below identifies employment land precincts proposed to be rezoned for employment use, therefore may also accommodate commercial and retail uses. The potential future employment land, which has been identified in endorsed NSW Government / council documents (e.g. A Plan for Growing, Growth Centre Structure Plans) will significantly add to the existing stock of undeveloped industrial land in the future. It is important to note that these areas are still under investigation and therefore total area may be overstated. ern Employment Area The ern Employment Area (WSEA) encompasses 1,960 hectares of industrial zoned land, located around the M4 / M7 interchange. There is a further 4,0 hectares of land under investigation for employment uses as part of a new Land Use and Infrastructure Strategy for the ern Priority Growth Area. This does not include the planned second airport site at Badgerys Airport (around 1,780 hectares). WSEA has been established by the state government to provide businesses in the region with land for industry and employment, catering for transport and logistics, warehousing and commercial space. Moving forward, ern Employment Area in particular has competitive advantages for manufacturing operations in terms of access to workforce, available land area, and separation from sensitive land uses such as residential. It is well placed to accommodate upsizers with reasonable supply of large sites which are limited elsewhere in the region; with these groups diversifying from local manufacturing into import and distribution models requiring additional floorspace. Industrial land demand assessment Historic Land Take-Up Between 2008 and 2015 the average annual take-up rate of industrial land was 155 ha. The majority of land take-up was concentrated in the and market over the period.

4 Take-Up Trend of Industrial Land (2008 to 2015) Take-Up (Ha) Average How Many Years of Left? Based on 1,676 ha Total Industrial Land Case Land Take-Up Rate (per annum) Years of Left Take-Up (Ha) Base Case 155 ha 10 years High Case 270 ha 6 years Source: Colliers International Projected Land Demand In order to determine the demand for land moving forward, the average historic land take-up rate have been applied (i.e. 155 ha per annum). This average will be considered the base case. A high case of 270 ha per annum (based on the highest take-up recorded over 2008 to 2015) scenario has also been considered in order to deduce a range in the years of supply left. In addition to undeveloped land, taking into account around 30 per cent of the total area set for future employment land release (i.e. 2,092 ha) equates to 3,767 ha of total land supply. To note: Only 30 per cent of the total potential future employment land area has been added to the total supply calculations, as these areas are subject to further investigations at the precinct planning stage to assess suitability for development (e.g. riparian corridors, slope, vegetation, transport corridors, local roads and lot fragmentation). Furthermore, these areas are set for employment uses and therefore also encompass retail and commercial space. BASE CASE 155 ha per annum HIGH 270 ha per annum 2,5 ha Future Employment Land Release 6,973 ha /Demand Gap Given that there is currently of undeveloped serviced land, and taking into account half of the undeveloped unserviced land (i.e. 1,253 ha) equates to 1,676 ha of total land supply. % of 1,253 ha 30% of Future Employment Land 2,092 ha To note: Only half of the total undeveloped underserviced land has been added to the total supply calculations in order to take into account land required for roads, infrastructure requirements and environmental considerations, as well as possible future planning changes to alternate uses (such as residential, retail, commercial land uses). 2,5 ha How Many Years of Left? Based on 3,767 ha Total Industrial Land Case Total 3,767 ha Land Take-Up Rate (per annum) Years of Left % of 1,253 ha Base Case 155 ha 24 years High Case 270 ha 14 years and 1,676 ha

5 Outlook Given that there has been large fluctuations in the annual takeup of industrial land over the past few years, we forecast that land take-up will rise for the western sub-markets over the medium to long-run. Historic land-take up and the projected industrial development pipeline indicate that the greatest proportion of activity has been and will continue to be concentrated within the west. Share of to be Delivered between 2017 and % Availability of custom built facilities to meet modern industry requirements, as well as purpose built infrastructure to accommodate large heavy vehicles. The differential between the western sub markets and the and sub markets land values and net face rents are still quite large and, as such, the above benefits will still apply over the medium to long run. It is expected that land values in the western sub markets will continue to rise as infrastructure projects near completion. Major infrastructure projects are shown in the diagram below. As stated in A Plan for Growing, the NSW state s strategy for land use over the next 20 years, ern will grow in importance in the future as industrial activity continues to shift away from the inner and eventually middle markets. The Plan supports the take-up of land in outer locations by identifying: 12% 4% Source: Colliers International 61% Future industrial infrastructure: Intermodal terminals, and transport infrastructure links (e.g. the investment of $3.6 billion over ten years under ern s Infrastructure Plan) connecting the Outer sub markets to middle and inner areas The strong take-up of sites within the western markets has been due to the shift in preference for industrial users. This is particularly noticeable for large users within the manufacturing and logistics industry sectors who would rather relocate than renew leases in order to increase supply chain efficiencies and reap the benefits of the following: Relatively cheaper land values and net face rents - land values in the west averaging at $435/sqm are currently around 40% lower than the average, and prime grade net face rents averaging at $123/sqm are 15% lower than the average (as at Q4 2016) Availability of large sites Major infrastructure projects Urban renewal corridors: providing increased housing, social infrastructure, and residential amenities, clustered within inner, stretching along train lines and within Priority Precincts and investigation areas (such as Wentworth, Castle, Bella Vista,, Arncliffe, and Green Square). This encourages industrial redevelopment and industrial user displacement/relocation from these innermiddle markets WSEA growing importance, as supported by the and growth centres. The growth centres are areas planned for greenfield housing supply, thus supporting population growth and increasing access to a greater pool of workers. BRINGELLY ROAD UPGRADE ($9 million) Completion late 2017 MOOREBANK INTERMODAL ($1.5 billion) Completion stage one mid-2017, stage two 2019 METRO NORTHWE ($8.3 billion) Completion 2019 ROAD ($1.6 billion) Completion 2020 M12 MOTORWAY ($1.3 billion) Completion mid 2020s WECONNEX MOTORWAY ($16.8 billion) Completion 2023 SECOND AIRPORT AT BADGERYS CREEK ($5-6 billion) Completion mid 2020s

6 554 offices in 66 countries on 6 continents $2.5 billion in annual revenue 610 million square feet under management 16,000 professionals and staff OUR RESEARCH EXPERTS Anneke Thompson National Director National Office Research Daniel Lees Director, NSW Research National Retail Research Kristina Mastrullo Associate Director National HRL & Hotels Research Sass J-Baleh NSW Research Helen Swanson QLD Research Kate Gray Associate Director SA Research Leo Lee NZ Research & Consulting Dominic Aungles Analyst ACT Research Misha White WA Research Quyen Quach Senior Research Analyst WA Research Julie Farmer Newcastle Research Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various sources and have not been verified by us. We have no belief one way or the other in relation to the accuracy of such information, figures and projections. Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. Colliers International Accelerating success.