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Industrial Vacancies Sink to All-Time Low

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Australia’s industrial vacancy rates are at an all-time low of 1.3 per cent nationally, down from 6.3 per cent two years ago.

Between July 1 and December 1 the net absorption rate of industrial sheds bigger than 4000sq m was up 30 per cent on the first half of the year to a total of 2.38 million sq metres.

Sydney was the only city to record a drop in net absorption figures due to the constrained supply, with vacancy down at 0.4 per cent.

CBRE head of industrial and logistics research Sass J-Baleh said the unprecedented demand for industrial assets had been underpinned by long-term factors driving up rental values across Australia.

“The Sydney and Melbourne markets are leading the country with respect to occupier activity and have recorded year-on-year rental growth of 6 per cent and 4 per cent respectively for super prime grade assets,” J-Baleh said.

“The significant growth comes as Australia’s e-commerce penetration rate hits a record 14 per cent.

“Interestingly, the US market experienced strong rental growth for industrial and logistics assets when their e-commerce penetration rate reached 14 per cent, and this is now what is being observed in the Australian market.”

Melbourne has recorded the strongest growth in industrial assets this year with half of national total gross take-up over the past 12 months recorded in the Victorian capital city.

New supply in Victoria in 2021 was double the long-term average, while net absorption totaled 860,000sq m in the second half of the year, resulting in lower vacancies across the industrial precincts in Melbourne.

Capital city vacancy rates

CityH2 2020H2 2021Net absorption
Sydney1.4%0.4%549,000sq m
Melbourne1.55%1.3%860,000sq m
Brisbane2.9%2.3%560,000sq m
Perth4.3%1.8%400,000sq m
Adelaide3.2%1.64%200,000sq m

^Source: CBRE Australian Industrial and Logistics H2 2021 Report


J-Baleh said 2022 was going to be a year of rental growth across most capital cities as occupiers looked to expand their footprints.

Sydney’s shrinking vacancy rate and strong demand had led to a 5.7 per cent increase in rental values over the past 12 months, and a lowering of incentive levels, which now average about 13 per cent.

CBRE regional director of industrial and logistics advisory Cameron Grier said occupiers had been competing 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 to 20 per cent,” Grier said.

“With occupiers looking to grow their omni-channel offering, we have also seen a surge in enquiry outside the major markets.

Retailers want 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 during the second half of 2021.”

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Article originally posted at: https://www.theurbandeveloper.com/articles/industrial-vacancies-hit-all-time-low