Entertainment and leisure operators are the latest entrants, known as the new industrials, in the leasing market which are taking up space in the traditional warehouse space.
In South Sydney, the inflow of new residents in older office block and warehouse conversions, are forcing demand higher for entertainment and other non-traditional industrial property tenants.
This is reflected in the Goodman Group's Sydney Corporate Park at Alexandria, which is now marketed as an entertainment precinct with indoor trampolining and skiing, together with sports and retail facilities plus a brewery and various cafes.
It is expected more of these tenants will look for space, as they are able to pay the ensuing higher rents than what a warehouse distributor paid in the past.
In time, vertical schools and universities are expected to enter the market, as witnessed in Parramatta.
JLL's associate director of industrial for South Sydney, Keegan Ridings, said there were significant rent and value differences between these 'New Industrial' occupiers, which included hospitality, showroom, creative office, food, child care and recreational firms – and traditional industrial businesses.
Savills data shows prime industrial net rents as at September 2014 in South Sydney are $130 per square metre to $190 per sqm, secondary buildings ranged $90 per sqm to $115 per sqm.
In the latest Research report, titled "The Rise of 'New Industrial' in South Sydney", greater high-density development and ongoing gentrification are underpinning the evolution of South Sydney from a blue-collar, industrial working class area to an upmarket, mixed-use precinct with a rapidly growing local residential population.
The report says the rent for 'New Industrial' occupiers is now $300-$400 per sqm, while showroom users or bulky goods retailers will pay between $200 and $300 per sqm.
"The push into South Sydney by 'New Industrial' occupiers is creating significant uplift in industrial rents and values through the diminishing industrial stock base, and through greater competition in the occupier market," Mr Ridings said.
"Once associated with logistics and manufacturing, South Sydney is becoming increasingly recognised as a residential growth hub. 'New Industrial' occupiers are increasingly competing with traditional industrial occupiers for space. These factors have far-reaching implications for the South Sydney industrial market, including changes in market pricing dynamics."
However, key traditional industrial occupiers are set to remain.
"While many of the traditional occupiers are moving west to take advantage of the NSW Government's Western Sydney Infrastructure Plan, including the airport at Badgerys Creek, key industries such as the transport and logistics sector are likely to remain in South Sydney," Mr Ridings said
"The precinct'sproximity to the CBD, Sydney Airport, Port Botany and important road corridors underline the ongoing strategic importance of South Sydney as an industrial hub."
