Aldi is struggling, with their retail growth failing to keep up with their demand for warehouse space in key growth areas such as Western Sydney.
A major shortage of available industrial land has led to Aldi being unable to secure vital infrastructure with the big German retailer taking more than two years to find a lease for industrial land near the upcoming Western Sydney airport that can service around 200 stores.
Late last year, Aldi finalised a leasing deal for a 87,000-square-metre distribution centre, which will be built by Ingham Property Group next to the airport.
Located at 475 Badgerys Creek Road in Bradfield, the automated distribution centre which is under construction will be situated on a former poultry farm owned by Ingham Property Group.
Aldi’s difficulty in securing industrial land in NSW, contradicts the local government’s land development monitor which states there are about 330 hectares of undeveloped land zoned for industrial purposes in Sydney’s west.
However, that figure is believed to be inflated by around 43%, according to CBRE analysis.
CBRE found only 190 hectares of undeveloped industrial land. Sydney will therefore face a land supply deficit in the range of 91 hectares to 319 hectares between 2025 and 2030.
Retailers which account for 42% of all pre-lease transactions of new warehouses in the city over the 2020-2024 period are the ones most affected by the land shortage.
The undersupply of land is also pushing up rents. Sydney’s industrial rents are reported to be around 85% more than equivalent sites in Melbourne and around 48% higher than that of Brisbane sites.
“While the rent growth is good for landowners, it is not good for the retailer and consumer,” said Cameron Grier, CBRE’s regional director of industrial and logistics businesses, according to the Australian Financial Review.
“Every cost in the supply chain adds to the final cost for the consumer and at the heart of the issue is that Sydney is chronically short of land.”
Investment volumes soared to $3.5 billion during the final quarter of 2024, a year-on-year increase of 52%, according to Savills.
Areas such as Western Sydney, which experienced a 5.4% increase in rent over the last three months of 2024, are expected to remain on a growth trajectory.
“Investors remain committed to increasing their exposure to the industrial sector, and a shift in the rate cycle will keep the investment momentum running in 2025,” said Savills industrial head Michael Wall.
