While tenant activity is strong, vacancies are skyrocketing in Brisbane’s industrial market, up 50 per cent quarter-on-quarter.
And the reason for the rise is being laid at the feet of strong supply completions, according to Knight Frank’s Australian Industrial Review Q1 2024 report.
The report said there was 196,000sq m of take-up in the first quarter of this year, up 6 per cent from the previous quarter and in line with the five-year average.
More than half of the leasing activity came from pre-commitments—104,290 square metres.
Knight Frank head of industrial logistics, Queensland Mark Clifford said manufacturing users were the most active over the quarter, accounting for 45 per cent of take-up, followed by retailers (25 per cent) and transport users (15 per cent).
“Of the eastern seaboard cities, Brisbane had the biggest take-up over Q1, while Melbourne and Sydney had a 43 per cent and 60 per cent drop respectively, largely due to a lack of pre-commitment deals.
“Despite the relatively strong take-up over Q1, strong supply completions in Brisbane have seen vacancy in the industrial market rise significantly, leading to greater options for tenants.”
Available industrial space increased 50 per cent from 309,073sq m in the last quarter of 2023 to 462,979sq m in the first quarter of this year.
This was in line with the trend across the industrial market on Australia’s eastern seaboard, with Melbourne’s vacancy increasing by 454,513sq m, ahead of Brisbane (+153,906sq m) and Sydney (+151,703sq m).
The research found vacancy in the country’s industrial market was back to early 2021 levels from the recent extreme lows, doubling across the eastern seaboard over the quarter to reach 1.49 million square metres.
Knight Frank partner, research and consulting Jennelle Wilson said available space in Brisbane’s industrial market had effectively doubled from the extreme lows of early 2023 and was back in line with the levels of early 2021.
“The development pipeline for 2024 is sitting at 936,000sq m, on-track to match the record 909,000sq m of completions in 2023,” Wilson said.
“Despite the increase in vacancy, rents have remained stable, edging up marginally by 0.4 per cent in 2024’s first quarter to be up by 6 per cent over the year to $158 per square metre net, while average incentives have also stabilised at 11 to 13 per cent.
“Looking ahead, the gap between prime and secondary rents is expected to widen. Recently it was common for secondary assets to achieve rents very close to prime levels but this is expected to become the exception rather than the norm over 2024.
“Prime rental growth is expected to remain flat through the first half of 2024 before being drawn upwards by economic rents again in the second half of the year.”
Clifford said in terms of transactions in Brisbane’s industrial market, the breadth of purchasers and the size of industrial deals had begun to increase in Brisbane.
“While private investors are still active in the sub-$30 million price bracket, this quarter also saw the participation of syndicators and institutional capital in the market,” he said.
The Knight Frank research found prime yields in Brisbane’s industrial market remained stable through the first quarter at 6.25 per cent.
Top transactions of past quarter
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