MHD INDUSTRIAL PROPERTY
LOWEST I&L VACANCY RATES IN MODERN HISTORY Australia’s Industrial & Logistics vacancy rate has dropped to its lowest point in the modern era. CBRE I&L experts explore this phenomenon affecting all major markets across Australia.
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otal I&L vacancy rate across Australia’s five major cities has dropped to a historic low of 1.3 per cent as national net absorption surpasses 2 million sqm, new CBRE research shows. Since the second half of 2019 (prepandemic) the national vacancy rate has been trending down, from 6.3 per cent in the second half of 2019 to a record low 1.3 per cent as at second half of 2021 (data up to and including December 1, 2021), demonstrating strong occupier growth and activity within the sector. Through the six-month period across 1H2021 and 2H2021 the national net absorption of 4000 sqm-plus industrial assets was up 30 per cent to 2.38 million sqm when compared to the first half of the year. The Sydney was the exception: experiencing 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,” says Sass J-Baleh, CBRE’s Head of Industrial & Logistics Research. “The Sydney and Melbourne markets are leading the country with respect to occupier activity and have recorded year-on-year rental growth of six per cent and four per cent, respectively, for super prime grade assets. “The significant growth comes as Australia’s e-commerce penetration rate hits a record 14 per cent. This mirrors US market conditions, which experienced strong rental growth for industrial and logistics assets when 26 | MHD FEBRUARY 2022
their e-commerce penetration rate reached 14 per cent.” CBRE’s Industrial & Logistics Vacancy Report for the second half of 2021 highlights that 90 per cent of national occupier movements are due to tenant expansion and new space requirements – not simply due to relocation purposes. Occupier activity in Melbourne remains the strongest in the country, representing 50 per cent of national total gross take-up over the past 12 months. Even though new supply in 2021 is just over double the longterm average (at 481,600 sqm), net absorption of space has been positive – totalling 860,000 sqm for 2H21 alone. As a result, vacancy across most Melbourne precincts has fallen. Sydney’s strong occupier demand and limited supply of new developments has led to significant rental value uplift of 5.7 per cent over the past 12 months and lowering incentive levels (now averaging 13 per cent). While below 2019 levels, Brisbane’s tenant demand over the past 12 months remains robust with around 560,000 sqm of positive net absorption recorded, with demand driven primarily by wholesale/retail trade occupiers, transport operators and manufacturers. Sydney has the lowest vacancy rate in the country, falling by a full percentage point to 0.4 per cent, with net absorption over 2H21 remaining strong at around 548,000 sqm, while Perth recorded the largest decline in vacancy rates (-2.5 per cent) to 1.8 per cent – just above the national average. The vacancy rates in Sydney, Brisbane and Perth are 0.4 per cent, 2.30 per cent and 1.80 per cent respectively, with Adelaide’s dropping just below 2.0 per
Cameron Grier, Regional Director Industrial & Logistics Advisory and Transactions Services, CBRE.
Sass J-Baleh, Head of Industrial & Logistics Research, CBRE.
cent – almost half that reported in 2H21. “Tightening vacancy has seen many occupiers fighting it out to secure the last remaining warehouses to secure their supply chains,” says Cameron Grier, Regional Director Industrial & Logistics Advisory and Transactions Services. “This competition has meant strong net effective rental growth for owners in the most tightly held submarkets, with many recent deals negotiated with no incentives. 12 months ago incentives in such buildings would have been 15-20 per cent. “With occupiers looking to grow their omni-channel offering, we’ve seen a surge in enquiry outside the major markets. With retailers wanting to have both a geographic presence and the
