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Australia has recorded the tightest rental market for industrial and logistics space, as many major hubs struggled to crack 1 per cent in 2023.
CBRE’s Industrial and Logistics Vacancy Report for the second half of 2023 showed a slight lift in vacancy rates for all major markets across Australia, however vacancies still sit below 2 per cent nationally.
Sydney has been revealed to have the tightest vacancy rate of any city in the world at 0.5 per cent.
Though these figures might cause concern among business owners and those involved with the health of the market, CBRE noted that the trend witnessed in the second half of 2023 brings positive news for those with industrial needs.
Sass J-Baleh, CBRE’s head of industrial and logistics research, noted: “We are now beginning to see upward movement in the vacancy rate across all major markets. Although the movements are not significant and remain at relatively low levels, we expect this increase to continue throughout 2024 as demand normalises and greater supply enters most markets.”
CBRE’s industrial and logistics regional director, Cameron Grier, agreed that 2024 should bring some relief.
“Occupiers will finally start having some choice in 2024, although we expect most will be taking the flight to quality journey. With this increased supply, it’s important to note most markets will remain well below historical vacancy levels,” Mr Grier said.
The firm also reported that net absorption continued to be dominated by occupier expansion. Net absorption reached 1.1 million square metres over the last six months of 2023, with Sydney and Melbourne accounting for most of that change.
“The greater net absorption in these two markets is owing to new floorspace being readily absorbed, with a combined total of 1.3 million square metres of new supply being added to Sydney and Melbourne over H2 2023,” Ms J-Baleh explained.
Across the four major industrial hubs of Sydney, Melbourne, Brisbane and Adelaide, the narrative was fairly consistent across 2023, with new space beginning to trickle onto the market in the later months.
Sydney’s vacancy rates in H2 2023 increased slightly from the record low of 0.2 per cent, mainly due to higher sublease activity, making up 70 per cent of vacant spaces. CBRE’s Western Sydney managing director, Michael O’Neill, said he anticipates a rise in vacancies in H1 2024, with leases reflecting growth in early Q1. The market is expected to normalise after two years of extraordinary growth, though land supply issues will persist.
Melbourne’s vacancy rate, meanwhile, rose to 1.6 per cent in the second half of 2023, with notable increases in the West precinct, reaching 2.9 per cent. Subleases constituted around 20 per cent of available space. CBRE senior director Tom Murphy noted the city’s average vacancy increased from 1.1 per cent in H1 2023 to 1.6 per cent in H2 – the highest nationally.
But it was Brisbane that recorded the largest movement in the vacancy rate between H1 2023 and H2 2023, increasing to an average of 1.4 per cent. The South precinct saw the highest increase from 0.3 per cent to 2.7 per cent, while the M1 Corridor rose from 0.4 per cent to 2 per cent. Net absorption dropped by over 50 per cent, leading CBRE’s Queensland state director Peter Turnbull to predict an increase in incentives in 2024.
And in Adelaide’s West precinct, vacancy declined from 4.5 per cent to 1.8 per cent in H2 2023, while other precincts experienced slight increases. CBRE’s industrial and logistics director Jordan Kies noted that speculative development stock was being absorbed quickly.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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