Australia: Western Sydney Airport: Implications on property and business owners in the region

The new Western Sydney Airport at Badgerys Creek is set to have a profound impact on both residential and commercial property within the Western Sydney Growth Corridor.  Thanks to new developments surrounding the new Aerotropolis, as well as a range of other investment commitments, the Federal Government is expecting significant economic and employment growth within the region in the years to come. 

Back in in 1986, the Federal Government purchased 1700 hectares of land at Badgerys Creek - with the proposed Western Sydney Airport having been the centre of significant and ongoing political debate ever since.  Two groups of clear winners that have emerged thanks to this development are property and business owners located within the Greater Western Sydney region.

It has been said that the Greater Western Sydney region surrounding the new airport is currently Australia's third largest economy, with the associated population set to grow by up to 50% by the early 2030s.  In addition to this expected growth, the government's commitment to investment in infrastructure is maintaining the connectivity of local businesses to consumers.  The 2017-18 budget committed $3.6 billion to upgrade road and transport linkages to the region, providing businesses located within the region with further opportunities to thrive.

A win for property owners in nearby suburbs

The recent downturn in Sydney's housing market, most notable over the past 6 months, has been a talking point for analysts, buyers and sellers alike.  However, property owners in the outer-west and south-west suburbs are still, at least in the medium to longer term, able to field premium offers from investors.  This is largely thanks to a notable shortage in available industrial and commercial real estate space, particularly in and around the new airport precinct.

How this impacts your lease

An increase in demand coupled with a shortage in the supply of commercial and industrial spaces within the region is set to provide landlords with heightened negotiating powers over their tenants.
As such, prospective tenants looking to negotiate lease terms for properties within the region surrounding the Western Sydney Aerotropolis can expect to face a wide range of potential issues, including:

  • An upside influence on rental amounts for the region;
  • A lowered ability to secure generous incentives;
  • Higher than normal increases in rent;
  • A lower likelihood of landlords entertaining requested amendments to standard lease terms;
  • An unwillingness by landlords to vary terms for unforeseen circumstances (e.g. power upgrades); and
  • An increase in pressures to sign leases based on the growing competition between potential tenants.

For commercial and retail tenants, the key to negotiating in this environment is to ensure that you undertake your due diligence prior to proceeding with negotiations, and similarly ensuring that you include as much detail in your letter of offer as possible - as this will require the landlord to include such details in the lease.

The forecasted economic growth associated with the Western Sydney Airport is an enticing opportunity for businesses seeking to expand their retail or commercial operations.  

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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