PROPERTY FOCUS MHD PROPERTY FOCUS (COLLIERS)
INDUSTRIAL AND LOGISTICS PROPERTY UPDATE Colliers’ Gavin Bishop, Head of Industrial Capital Markets, and Luke Crawford, Director of Industrial Research, explain to MHD the important developments for Q3 2021.
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021 has set new benchmarks for the Australian industrial and logistics sector as leasing and investment demand reach new heights. Leasing demand is forecast to well exceed four million sqm for the 2021 calendar year, up from the previous record of 3.3 million sqm in 2020, while investment volumes have already surpassed $12 billion, which is well above the previous high of $7.0 billion set back in 2016. “As a result of the record levels of occupier and investment demand, the sector completed its best year on record, providing a total return of 23.2 per cent in the year to June 2021,” Luke Crawford, Director of Industrial Research at Colliers, says. “This is above the previous record set back in late 1988, and the performance spread over the retail and office sectors is currently at record highs.” As reported in Colliers’ Industrial Research and Forecast Report for the second half of 2021, the flow-on effect from lockdown management strategies has accelerated online shopping, which has increased by almost 30 per cent year-on-year to August 2021. As a result, online sales now represent 13.9 per cent of total retail sales, and Colliers’ research forecasts suggest this will grow to approximately 18 per cent by 2025.
LEASING DEMAND IS AT RECORD LEVELS WITH A QUARTER TO RUN In the first nine months of 2021, almost 3.7 million sqm leased nationally (>5000 sqm) and has already surpassed the 3.3 million sqm of take-up recorded in 2020, which was a record year in itself. “It has been a phenomenal result for the sector as occupiers scramble 24 | MHD DECEMBER 2021
to find warehouse space,” Luke says. “Sydney and Melbourne markets have underpinned the strong result for 2021. However, we have also seen a sharp rise in leasing activity in the Brisbane and Adelaide markets, which reflects the improvement in local economic conditions.” The report states that occupier demand has been most pronounced for prime space, with substantial take-up being recorded for pre-lease and speculative space. Over 1.5 million sqm of take-up in 2021 has stemmed from pre-lease or speculative developments, representing 41 per cent of total demand.
VACANCIES FALL FURTHER At a national level, vacancy rates for facilities >5000 sqm have fallen to 2.8 per cent in Q3 2021 from 3.5 per cent in Q2 2021 and 5.1 per cent in Q3 2020. “The fall in the national vacancy rate over the quarter was underpinned by a large fall in the Brisbane market while vacancies in Sydney and Melbourne remain at historical lows,” Luke says. Colliers research forecasts that
despite the increase in speculative construction, vacancy rates are expected to remain below 4.0 per cent in 2022, placing further upward pressure on rents. Over the past 12 months, rental growth has increased 4.3 per cent nationally for prime space and 5.2 per cent for secondary. “While the national rate has been strong, there have been selected markets where rental growth has well exceeded 6.0 per cent and includes the Central West in Sydney and South East in Melbourne,” Luke says. Heightened demand has prompted a surge in speculative developments Colliers’ Report states that developers and institutional groups have progressed speculative developments with leasing demand currently running at record levels. Over one million sqm of speculative developments are currently under construction along the East Coast, 30 per cent of which will reach completion in Q4 2021, and the balance will complete in 2022. Melbourne accounts for the largest share of speculative space under construction at 52 per cent of the
