The industrial and logistics vacancy rate across Australia’s five major cities has fallen to a historic low of 1.3%, as national net absorption surpasses two million sqm.
CBRE research shows the total vacancy rate for Sydney, Melbourne, Brisbane, Perth and Adelaide trended down from 6.3% in the second half of 2019 to a record low 1.3% in the second half of 2021.
There was more than 4,000 sqm of industrial net absorption during the six-month period across 1H2021 and 2H2021.
The only exception was Sydney, which experienced a decline in net absorption due to lack of stock availability.
“Demand for industrial and logistics space continues on its upward trajectory, with the national vacancy rate sitting at a historic low, underpinned by stable, long-term factors, which is driving significant rental value uplifts across Australia,” said CBRE’s Head of Industrial & Logistics Research Sass J-Baleh.
“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.”
“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.”
CBRE found that 90% of national occupier movements were 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 half of national total gross take-up over the past 12 months.
The boom in occupier activity comes in spite of new supply in 2021 reaching just over double the long-term average at 481,600 sqm.
Sydney has the lowest vacancy rate in the country, falling to 0.4%, while Perth recorded the largest decline in vacancy rates (-2.5%) to 1.8%.
“With vacancy tightening so swiftly this year, we have seen many occupiers fighting it out to secure the last remaining warehouses to secure their supply chains,” said Cameron Grier, Regional Director Industrial and Logistics Advisory and Transactions Services.
“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%.
“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 during 2H21.
“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.”
CBRE found that the retail sector climbed to be the third-highest industry sector driving demand for industrial space in Australia.
Recent industrial deals around the country include EG’s acquisition of two industrial sites in the Melbourne suburbs of Blackburn and Blackburn North for $79 million, while LBP Developments sold a prime industrial development site in Southwest Sydney to a private developer for $16.3 million.
Last month, Dexus Industria REIT exchanged contracts to buy a warehouse in the Brisbane suburb of Narangba for $44.5 million, while Centuria Industrial REIT acquired a portfolio of four industrial properties across Sydney, Melbourne and Brisbane for $129.4 million.