Australia has lowest vacancy rates globally

Lowest vacancy rate

CBRE says Australia has the lowest industrial and logistics vacancy globally, after falling to 0.8 per cent during the first half of 2022 with year-on-year rent growth exceeding 13 per cent.

The end-of-2021 figure of 1.3 per cent was Australia’s previously lowest record, according to CBRE research which also showed a further tightening across the country’s five major markets.

“From 6.3 per cent at the end of 2019, Australia’s Industrial & Logistics vacancy rate has trended down to its current record low of 0.8 per cent,” Sass J-Baleh, CBRE’s Head of Industrial and Logistics Research Australia, says.

“Although vacancy rates around the globe have also fallen over the past 12 months in particular, Australia now has the lowest national vacancy rate globally, and Sydney the lowest vacancy rate of any city,” she adds.

CBRE says Australia is ahead of Sweden (1.1 per cent), end-of-2021 leader Belgium (1.3 per cent), the United Kingdom (1.6 per cent) and Hong Kong SAR (2.3 per cent).

The global average at the end of H1 2022 was 2.7 per cent with mainland Europe as a collective and the USA sitting at 2.6 per cent and 3.1 per cent respectively.

Sydney has Australia’s lowest vacancy rate following a further reduction from 0.4 per cent to 0.3 per cent over the past six months.

That is also the lowest of any major city around the globe, ahead of Los Angeles (0.5 per cent), Gothenburg (0.9 per cent), Seoul (1.0 per cent) and Auckland (1.0 per cent).

“With Australia’s highest vacancy rate in any market now just 1.4 per cent in Brisbane, the downward movement recorded for each market reflects the current chronic undersupply,” Sass says.

“Australia has a relatively low share of developments that are speculative, especially compared to other major markets, so we are unlikely to see vacancy rates change significantly over the next 12 months.”

CBRE says a dearth of opportunity is driving significant rental growth, with super prime grade rents rising a national average of 13 per cent year-on-year to the end of June, already exceeding CBRE’s full-year forecast of 12 per cent.

Rental growth has been most pronounced in Sydney, currently sitting at 23 per cent year-on-year, followed by a 17 per cent rise in Perth and 14 per cent in Melbourne.

“The depth in demand is giving owners and developers significant choice, and only occupiers with the strongest covenants are winning the right space,” Cameron Grier, Regional Director of CBRE Industrial & Logistics in Pacific, says.

“We expect demand to continue to outpace supply this year and into 2023, and we are seeing rental growth above CBRE Research forecasts,” he adds.

He says new buildings in the 4000 sqm to 5000 sqm range in Western Sydney, for instance, have broken past the $170/sqm net barrier, which is about $30/sqm more than they were at the start of the year.

CBRE notes in line with the reduction in available supply, net absorption through the first half of 2022 fell by approximately 40 per cent against H2 2021, with the national figure 1,400,000 sqm.

It adds that most of Australia’s major markets have high pre-commitment levels on supply in the pipeline, including Sydney with 73 per cent of the city’s incoming 875,000 sqm.

“Speculative developments only account for 33 per cent of the floorspace in Australia’s pipeline, compared with 76 per cent in the USA, 57 per cent in the UK, 48 per cent in Spain and 43 per cent in Germany,” Sass says.

“That means the Australian market is less susceptible to volatility and major fluctuations in supply and vacancy levels moving forward.”

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