- Australia's vacancy rate for the industrial and logistics sector is just 0.8%
- Sydney has the lowest vacancy rate of any city in the world
- Cost of rent has increased significantly, with Sydney recording 23% year-on-year growth
After falling 0.8% during the first half of 2022, CBRE research has confirmed that Australia has the lowest industrial and logistics vacancy rate in the world.
The findings come as the end-of-2021 figure of 1.3% was already the country’s lowest on record.
A further tightening has since been recorded across the five major markets in Australia.
After Australia, the nations with the lowest vacancy rate include Sweden (1.1%), Belgium (1.3%), the United Kingdom (1.6%) and Hong Kong SAR (2.3%).
The report noted the global average, as of the end of H1 2022 was 2.7%. Mainland Europe and the USA sat at 2.6% and 3.1% respectively.
Sydney’s market has been reduced from 0.4% to 0.3% – the lowest of any city globally.
After Sydney, Los Angeles (0.5%), Gothenburg (0.9%), Seoul (1%) and Auckland (1%) have the lowest rate of major cities.
“From 6.3% at the end of 2019, Australia’s I&L vacancy rate has trended down, to its current record low of 0.8%,” said Sass J-Baleh, CBRE’s Head of Industrial & Logistics Research Australia.
“Although vacancy rates around the globe have also fallen over the past 12 months in particular, Australia now has the lowest national vacancy rate globally, and Sydney the lowest vacancy rate of any city.
“With Australia’s highest vacancy rate in any market now just 1.4% in Brisbane, the downward movement recorded for each market reflects the current chronic undersupply.
“Australia has a relatively low share of developments that are speculative, especially compared to other major markets, so we are unlikely to see vacancy rates change significantly over the next 12 months.”
|H2 2021 vacancy rate||H1 2022 vacancy rate|
*Based on 5,000sqm-plus NLA buildings in Sydney and Melbourne and 3,000sqm-plus NLA buildings in Brisbane, Adelaide and Perth
With tightening vacancies, a dearth of opportunity has driven rental growth. Super prime grade rents have risen by 13% on a year-on-year basis nationally, which exceeds CBRE’s full-year forecast of 12%.
Sydney has experienced 23% in rental growth year-on-year. Perth follows (17%) with Melbourne also recording a similar rise (14%).
“The depth in demand is giving owners and developers significant choice, and only occupiers with the strongest covenants are winning the right space,” said Cameron Grier, Regional Director of CBRE Industrial & Logistics in Pacific.
“We expect demand to continue to outpace supply this year and into 2023, and we are seeing rental growth above CBRE Research forecasts.
“New buildings in the 4,000sqm-5,000sqm range in Western Sydney, for instance, have broken past the $170/sqm net barrier, which is about $30/sqm more than they were at the start of the year.”
Net absorption declined during the first half of 2022, falling by 40% against H2 last year, with the national figure 1,400,000 sqm.
“Speculative developments only account for 33% of the floorspace in Australia’s pipeline, compared with 76% in the USA, 57% in the UK, 48% in Spain and 43% in Germany,” Ms J-Baleh added.
“That means the Australian market is less susceptible to volatility and major fluctuations in supply and vacancy levels moving forward.”
Most major markets in Australia have high pre-commitment levels on supply in the pipeline, including Sydney.