St Hilliers Property Pty Limited has commenced construction of a new  $30 million institutional grade industrial warehouse facility on its development site at Smeaton Grange in Sydney's south west.

The development, to be known as Macarthur Industrial Estate, is located at
34-38 Anzac Avenue, Smeaton Grange and will comprise a total of 22,028 square metres GLA on a 3.5 hectare site. The facility, which is scheduled for completion in December this year, will have the ability to be divided into six smaller units of approximately 3,500 square metres.  

The design is specifically targeting a sector of the market where there is limited supply of available properties and where demand is strong. Key features of the facility are the wide driveways catering for B-Double truck access; flexibility in design; corporate style accommodation; and off-street parking for 183 cars.

Chief Executive Officer of St Hilliers Property, Tim Casey said: "We will be capitalising on the difference between pre-lease rent levels as opposed to existing facilities that currently demand up to 10-15% rental premiums over rates achieved in a pre-lease environment."

"The industrial property market in this area continues to see increased levels of activity on the back of the improved infrastructure, namely the M7 West Link," he said.

"The transport and logistics companies are driving the demand for industrial warehousing and we will be targeting them for our facility. Many of them only require a short lead time to be operational," he said. 

Jones Lang Lasalle and Colliers International are joint leasing agents for the development.

Gavin Bishop of Colliers International believes St Hilliers has been very strategic in its timing and the delivery of the units will be very well received by the market.

"Leasing demand is strengthening in Sydney's industrial markets, both for pre-lease opportunities and speculative development.

"The rental market within Smeaton Grange has experienced strong growth over the first half of 2007 with rental levels in excess of $93 per square metre being achieved for 1,500 square metre facilities. There has been approximately 38,000 square metres of warehouse space pre-committed within Smeaton Grange over the last 12 months, which is a strong increase over previous years."

Mr Bishop anticipates that 60% of St Hilliers development will be pre-committed prior to practical completion.

Jones Lang Lasalle's Matthew Herrett said: "The south west industrial market generally is becoming far more sophisticated with occupiers now more savvy in their approach. This is partly evidenced by the fact users are not prepared to compromise on the quality of the building they seek, rather they are generally compromising on location or even remaining in existing premises due to the lack of good quality alternatives."

"Overall, the number of mid-sized lease deals being transacted is tempered largely by the lack of quality stock available.  Good quality alternatives are few and demand for buildings in the 2,500 to 5,000 square metre size range remains solid, making feasible St Hilliers speculative build of mid-sized warehouse facilities offering flexibility to accommodate up to 14,000 square metres in one line, he said."

He added that decentralisation has enabled the manufacturing and processed based industries to take advantage of the difference in property values, which underpins the continued demand for areas such as Smeaton Grange. 

"Not only does Smeaton Grange allow fast access to the motorway, but also offers new accommodation at relatively inexpensive rents compared to the more established industrial locations such as Padstow, Milperra, Revesby and Bankstown."