The industrial vacancy rate across Australia’s major cities has fallen to a historic low of 2.24 per cent, following occupier take up of space equating to the size of inner-city suburbs such as Glebe in Sydney or Carlton in Melbourne.
Through the six-month period across Q4 2020 and Q1 2021, the net absorption of 4,000sqm-plus industrial assets in Sydney, Melbourne, Brisbane and Perth was 1,733,316sqm.
The net absorption figure combines the changes in total stock levels and vacant space and has been calculated for the first time by CBRE’s industrial and logistics and research teams for the H1 2021 Industrial Vacancy Report.
Including Adelaide, the total vacancy rate across Australia’s five major cities is 2.24 per cent, down from 2.95 per cent in H2 2020. This is a historical low for the industrial and logistics sector.
Sydney has the lowest vacancy rate at 1.40 per cent, halving following the net absorption of 738,325sqm of supply, while Melbourne’s vacancy rate has fallen by a full percentage point to 1.54 per cent after net absorption of 653,365sqm.
“CBRE’s Industrial Vacancy Report tracks net absorption across Australia for the very first time,” CBRE head of industrial & logistics research Sass J-Baleh said.
“Demand for industrial and logistics space continues to rise with the national vacancy rate sitting well below 3 per cent, underpinned by stable, long-term factors.
“That includes the structural shift to online retail and its role in creating greater activity among logistics and transport operators, the rise in the need for data centres, and the growth in the non-discretionary retail sector, which supports the expansion of food manufacturing and logistic operators, as well as the demand for cold storage space.
“More than 60 per cent of the supply expected to be delivered in 2021 and 2022 has already been pre-committed, and therefore we expect vacancy rates to remain relatively low over the next 18 months.”
The vacancy rates in Brisbane and Perth are 2.90 per cent and 4.30 per cent respectively and – tracked for the first time – the figure in Adelaide stands at 3.20 per cent, with net absorption data to follow in subsequent reports.
“The industrial and logistics market has bounced back with considerable vigour following the COVID-related challenges of 2020,” said CBRE regional director of industrial & logistics Cameron Grier,
“In 20 years, I have not witnessed such vast volumes of leasing enquiry. This has not been restricted to the major east coast markets, either, with South Australia and Western Australia also experiencing record leasing demand.
“In 2020, e-commerce experienced five years of growth in just 12 months, and now accounts for around 13% of all retail sales in Australia. There is still a long runway for growth in this area to catch other APAC countries, where the proportion of online sales typically ranges between 20% and 30%.
“This, coupled with the fundamental rethink of how occupiers deal with inventory levels, has created considerable momentum in the industrial and logistics sector in 2021.
“From an occupier’s point of view, the expected tightening of vacancy across all markets means that they now need to start thinking about their moves much earlier to ensure the continuity of their supply chains.”
The changing nature of retail has already shaped the demand for space, particularly in Melbourne, which accounted for 53% of the total absorption in Australia in Q1 2021, a quarter of which was by retailers.
“Demand from e-commerce will continue to be transformational,” Ms J-Baleh added.
“Take-up from this sector reached an all-time high last year with the absorption of 1,000,000sqm of logistics space, and we forecast an additional 2,500,000sqm will be required over the next five years to support the growth of online shopping in Australia.
“The current supply pipeline indicates a shortage of new space to meet that demand, so we expect capital and rental value uplift to continue.”