Australia's industrial property market the ‘tightest in the world', with vacancy rates tumbling to just 0.8% in the first half of 2022.
At present there is a chronic shortage of warehouse space supply in the Australian market. Furthermore, some new development projects’ completion dates have now been delayed to 2023 due to weather, and supply chain disruption (including material shortages). This, coupled with persistent demand for space from occupiers, means we don’t expect to see much movement in the vacancy rate over the next six months.
New research from CBRE calls Australia's industrial property market the ‘tightest in the world', with vacancy rates tumbling to just 0.8% in the first half of 2022.
Ecommerce-related occupiers have accounted for 15% of floorspace leased in 2Q22 and an additional 500,000 sqm is needed to cater to the existing ecommerce online sales operations. With demand outpacing supply, average rents increased significantly in 1Q22 with a national prime average weighted net face rental growth the strongest seen since 1994.
Gross take-up in Australia's logistics and industrial markets fell below 1 million sqm for consecutive quarters in 1Q22, reaching 767,300 sqm – a 13% decrease in gross take-up quarter-on-quarter.
A total of 28 new development projects reached practical completion during the quarter, adding a total of 478,400 sqm of space to the national market. This represents a 28% increase over the long-term 10-year quarterly average.
Last mile logistics in focus
Vacancy rates will remain tight in Sydney and Melbourne given the underlying levels of occupier demand. There is the potential for vacancy rates to rise in Brisbane given the large volume of speculative supply in the pipeline.
Ongoing occupier demand is placing upwards pressures on asking rents with quarter-on-quarter growth reaching a 27 year high. Occupiers are actively seeking warehouse space in these locations to fulfill their last-mile logistics functions and are seeking flexible warehousing solutions.
Overall, the conditions within the industrial markets in Australia have remained strong over the last 12 months with the concentration of activity from the transport, postal, and warehousing occupiers (50%). Demand continues to be driven by the transport, postal warehousing, and wholesale-retail sectors.