News

Australian industrial and logistics vacancy rate hits all time low

vacancy rate

The total industrial and logistics vacancy rate across Australia’s five major cities has dropped to an historic low of 1.3 percent, as national net absorption surpasses 2 million sqm.

CBRE’s latest research shows the national vacancy rate has been trending down, from 6.3 per cent in the second half of 2019, showing strong occupier growth and activity within the sector.

Sydney was the exception with the market experiencing a decline in net absorption because of stock availability.

Sass J-Baleh, CBRE’s Head of Industrial & Logistics Research says demand for industrial and logistics space continues on its upward trajectory.

“The Sydney and Melbourne markets are leading the country with respect to occupier activity and have recorded y-o-y rental growth of 6% and 4%, respectively, for super prime grade assets,” Sass says.

“The significant growth comes as Australia’s e-commerce penetration rate hits a record 14%. Interestingly, the US market experienced strong rental growth for industrial and logistics assets when their e-commerce penetration rate reached 14%, and this is now what is being observed in the Australian market.”

The report highlights that 90 per cent of national occupier movements are due to tenant expansion and new space requirements, rather than purely for relocation purposes.

Occupier activity in Melbourne remains the strongest in the country, representing 50 per cent of national total gross take-up over the past 12 months. Even though new supply in 2021 is just over double the long-term average (at 481,600 sqm), net absorption of space has been positive and has totalled 860,000 sqm for 2H21* alone. As a result, vacancy across most Melbourne precincts has fallen.

Sydney’s strong occupier demand, coupled with a limited supply of new developments has led to a significant rental value uplift of 5.7 per cent over the past 12 months, and a lowering of incentive levels (which now average 13 per cent).

While below 2019 levels, Brisbane’s tenant demand over the past 12-months remains robust with around 560,000 sqm of positive net absorption recorded, with demand being driven primarily by wholesale/retail trade occupiers, transport operators and manufacturing services.

CITY — H2 2020 VACACNY  — H2 2021 VACANCY — NET ABSORPTION

Sydney —  1.40% — 0.4% — 548,000sqm

Melbourne — 1.55% — 1.30% — 860,000sqm

Brisbane — 2.90% — 2.30% — 560,000sqm

Perth — 4.30% — 1.80% — 400,000sqm

Adelaide — 3.20% — 1.64% — 200,000sqm

Cameron Grier, Regional Director Industrial & Logistics Advisory and Transactions Services says with vacancy tightening so swiftly this year, occupiers are fighting it out to secure the last remaining warehouses to secure their supply chains.

“This competition has resulted in strong net effective rental growth for owners in the most tightly held submarkets, with many recent deals being negotiated with no incentives, whereas 12 months ago incentives in the same building would have been 15-20,” Cameron says.

“With occupiers looking to grow their omni-channel offering, we have also seen a surge in enquiry outside the major markets. With retailers wanting to have both a geographic presence and the ability to control their own warehouses, vacancy fell in Queensland, South Australia and dramatically in Western Australia.”

“The supply/demand equation is setting 2022 up as a great year for rental growth for landlords that own assets in these tightly held markets.”

For more information on CBRE, click here.

© All Rights Reserved. All content published on this site is the property of Prime Creative Media. Unauthorised reproduction is prohibited

JOIN OUR NEWSLETTER

JOIN OUR NEWSLETTER
Close