ESR swoops on South Sydney as multistorey takes off

ESR Australia boss Philip Pearce in Sydney. Picture: James Croucher

Asian warehousing giant ESR Australia has secured one of the few remaining large-scale industrial sites in South Sydney which can support a multistorey logistics ­facility amid a boom in the sector.

The group, along with rivals including Goodman, Charter Hall and Logos, is building the new style of warehouses, which are dramatically overhauling the area and being filled up by e-commerce and distribution companies.

The latest acquisition takes the ESR development pipeline in Australia to $7.9bn at a time when demand for logistics property is surging, particularly in Sydney.

ESR has just settled on the 48,000sq m site in Stephen Rd, Botany, for $143m. It was bought from ­industrial coating resins company Allnex, which occupies the property.

In line with its strategy, an ESR-run fund, EADP II, will redevelop the asset into a core logistics estate. ESR intends to invest a further $300m to deliver about 58,000sq m of gross floor area of top class space.

The property, which has planning controls with no floor space ratio or height limits, providing a significant opportunity for redevelopment, could be undertaken speculatively.

Under the terms of the deal, Allnex has entered a five-year leaseback, which will provide enough time for it to ensure alternative sourcing routes are established near with its customers and ESR time to obtain planning approvals.

“ESR Australia is pleased to secure an infill site of this scale in the highly sought Botany Bay Precinct. The strong demand for space with the precinct and site’s planning overlay will enable us to explore multi-level warehousing on the site,” ESR Australia chief executive Phil Pearce said.

Mr Pearce said ESR would ultimately redevelop the site once the tenant moved out. He said the developer could “potentially” do a multi-level facility and had the flexibility to undertake three levels.

Trent Gallagher and Michael Crombie of Colliers handled the sale.

Allnex vice president of Commercial South-East Asia, Australia and New Zealand, Zel Medak, said the decision to sell the Botany Bay property followed a strategic review of its regional operations.

“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,” he said.

ESR has been expanding around the country and last month won a huge precommitment from the Toll Group at another $1.2bn industrial precinct in Sydney, which it will keep expanding out as rentals increase.

That move by the Japan Post-owned Toll to shift into the Westlink Industry Park came amid a squeeze on space along the eastern seaboard, which is driving the lift in rents.

South Sydney is one of Sydney’s best located precincts, with proximity to Port Botany, Kingsford Smith Airport, and major arterial road networks. Sydney has a low vacancy rate sitting at 0.2 per cent, while prime rental rates have grown 37.2 per cent over the last year and are forecast to rise another 15 per cent this year.