The research data indicated that prime gross effective rent rose by 20% in Sydney over the 12 months to December 2016 to $894 per square metre per annum.
Limited new supply until 2020 is also expected to cause vacancy levels to fall below 3% and drive strong rental growth until then.
Sydney industrial market
The report said: “Sydney’s industrial market is relatively diverse with wide variations in rents across its five submarkets.
“Infrastructure projects are shaping supply-demand dynamics across the submarkets, with compulsory land resumptions withdrawing stock, but new infrastructure opening up new precincts.”
It added that South Sydney has seen significant stock withdrawal for residential conversion and new transport infrastructure, causing vacancy to tighten and push up rents.
As a result the average prime gross face rents in South Sydney is between $170 and $190 per square metre, compared to $105 achieved in the South West.
Commercial property outlook
Cushman & Wakefield say commercial property yields are approaching historic lows which suggest the market could be near a peak. Even so, it says several factors suggest yields could compress further in the short to medium term.
It added: “Compared to both fixed interest markets and many international markets, [the income returns from] Australian commercial property appears relatively good value…when compared to risk free alternatives such as government bonds.
“Australian commercial real estate yields are relatively high when compared to other countries and should continue to attract investor interest from around the world.”
The report said that New South Wales and Victoria lead the commercial real estate markets across all sectors with higher demand and rents and tighter vacancy and yields.
It added that the value of institution grade Australian commercial real estate market in 2016 was estimated to be around $743 billion.