Toll Group heads west as warehousing takes off

Asian giant ESR has struck one of the largest precommitment deals of the cycle.

Toll Group is set to move to the Westlink Industry Park amid a squeeze for space along the eastern seaboard, which is driving a surge in rents. Picture: James Croucher

Asian logistics giant ESR has won a huge precommitment from the Toll Group for its latest $1.2bn industrial precinct in Sydney and will keep expanding it out as rentals increase.

The move by the Japan Post-owned Toll to shift into the Westlink Industry Park comes amid a squeeze for space along the eastern seaboard, which is driving a surge in rents.

ESR Australia CEO, Phil Pearce, said Toll was the first tenant at the Kemps Creek site, which will have an end value of about $1.2bn. Toll’s commitment amounted to more than 20 per cent of the planned space. “There is a lot of pent-up demand for space in the precommitment market,” he said. While input costs have jumped, he estimated that rents were up by about 40 per cent in western Sydney.

“It's probably the strongest rental growth globally,” he said. “It has been driven by very high occupancy across all sectors.”

Mr Pearce said developers were taking advantage of the conditions by building speculatively, and the group would look to build out parts of the Kemps Creek site and seek tenants.

He said Brisbane and Sydney had led rental growth over the past 12 months, with Melbourne following. It also has been buying more land in these cities.

ESR and Toll will together invest about $420m into what they call a next-generation retail distribution and fulfilment facility at Westlink Industry Park.

Toll will expand its existing partnership with ESR, taking a 10-year lease over a fulfilment centre of about 68,000sq m, covering 10.8 hectares. It will also have offices and amenities, with a 300-space multi-deck car park.

An artist’s impression of Westlink Industrial Estate.

The Mamre Rd complex will be Toll’s largest distribution and fulfilment facility in Australia. All planning permits have been received, and the new facility will be built minimising waste and incorporating recycled materials, where appropriate, with a target 5 Green Star Design and As Built rating. The complex will use renewable energy and minimise consumption through LED lighting, rainwater harvesting and EV chargers.

There will be $75m spent on automation technology to support growth in e-commerce, retail and omnichannel fulfilment for Toll customers. The complex will store close to one million cartons and, using automated picking stations and connected zone-routing stations, will send out more than 37 million annually.

Real estate agency Savills said the industrial market was undergoing record rent surges, with rents nationally growing by up to 24 per cent year-on-year, while vacancy remains low.

The agency confirmed east coast rents had surged by 40 per cent since 2020 after a solid 18 months of hefty occupier demand. Savills said east coast markets were witnessing a growth rate of more than seven times their 15-year average.

Prime rents on the east coast have soared by almost 40 per cent on three years ago.