Brisbane and Sydney are pegged to experience the strongest industrial rental growth this year at 6% a piece. However, this single-digit growth pales against the 16% and 29% average rental growth experienced respectively in 2022.
Across the other Australian capital cities, industrial rental are also expected to continue heading north with Knight Frank forecasting growth of 4%, 4% and 3% in Melbourne, Perth and Adelaide respectively.
Based on Knight Frank data, Brisbane and Sydney’s industrial sector will continue to outperform in 2025, with 4% growth in industrial rents versus 3% for all other capital cities.
Overall, Brisbane’s vacant space increased 31% to 343,128 sqm but remains 45% below the recent early 2021 peak, however, existing prime industrial vacancy in Brisbane fell by 26% to 31,436 sqm over Q3.
By comparison, availability across all East Coast capital cities increased by 30% over Q3 2023, according to the Knight Frank research, but vacancy was still 52% below the level of two years ago.
Broader range of users
While vacancy levels in Brisbane have lifted from recent extreme lows, Knight Frank data reveals that much of the increase over Q3 came from secondary space.
It’s understood that the 150,000-plus square metres of secondary space currently available is almost exclusively backfill space for tenants who have upgraded to prime or newly built space.
Interestingly, Jennelle Wilson, partner of research at Knight Frank Qld notes speculative space comprises a substantial proportion of industrial vacancy.
“Speculative space available increased by 14% with new construction starts of 64,883sq m. Speculative space now accounts for 47% of total vacancy, with 12% in completed speculative projects and 35% under construction,” said Wilson who believes this is helping to attract a more diverse range of tenants.
Transport, postal and warehouse comprise a third of uptake
Overall, transport, postal and warehouse tenants remain the most active, comprising 34% of take-up over the past 12 months.
In the wake of rent rises, Mark Clifford, head of industrial logistics, Qld, at Knight Frank suspects owners wanting to maintain high rents may have to play ball when it comes to the all-important incentives.
“A wider range of reported incentives is expected as tenants face strong competition on some assets, while income security is sought on others,” said Clifford.
Over Q3 2023, average incentives in Brisbane stabilised at 11% to 13%.
400,000 sqm of pre-commitments
The Knight Frank research found with almost 400,000 sqm of pre-commitments in place for delivery in 2024 and continued appetite for speculative development, 2024 is also expected to see a high level of completions in line with, or potentially higher, than the 2023 new supply in Brisbane.
In summary, Clifford is witnessing a more measured approach by tenants to determine their space needs amid higher rents.
“While supply – and choice for tenants – has risen, with available supply still set to remain tight for the foreseeable future, rental growth is expected to continue,” said Clifford.
Annual take up
Meantime, while leasing take-up is down from recent frenetic levels, it remained steady in Q3 in line with the previous quarter at 190,170 sqm.
However, annual take-up sits at 855,000sqm, 16% above the five-year average.