- Industrial rents and land values on the rise across Australia's east coast
- Queensland breaks industrial transactions volume continuing streak since 2015
- Melbourne's West outshines, with 100% increase in land values and largest average face rent growth
Industrial rents are continuing to grow across the Sydney, Melbourne and Brisbane markets as strong tenant demand and investor activity causes land values to rise.
New research commissioned by Cushman & Wakefield indicated strong rental price growth in the industrial sector over the 6 months to March 31.
Sean Ellison, NSW Research Manager at Cushman & Wakefield said, “Land prices and rents held largely steady in Q1, despite continued upwards pressure on prices, building on significant increases in Q4 2021.”
The commercial real estate services firm expects land values to continue on this trajectory in 2022 as activity remains elevated.
Sydney rents and land values rising
Prime net face rents within Sydney’s South have risen dramatically over the past six months, by more than 20% to reach an average of $216 sqm pa.
Elsewhere in Sydney, fluctuations have been much more modest.
Prime net face rents average $127 sqm pa in Sydney’s North West, $131 sqm pa in the South West, $134 sqm pa in the Outer West and $148 sqm pa in the Central West.
On average, industrial land values in Sydney have increased by 9% over the previous two quarters. Yields also remained relatively stable, ranging between 3.0% and 4.5% and averaging at 4.1%.
Transaction volumes in NSW have also performed strongly, increasing to $1.8 million in Q4. In Q1, transaction volumes decreased significantly to $385 million, though this decline is to be expected in the beginning of the calendar year.
Notable transactions included the $152 million acquisition of 286 Horsley Road by ESR Group and the $110 million purchase by AirTrunk of 51 Huntingwood Drive.
Brisbane’s record breaking 2021
Meanwhile in Brisbane, net face rents have continued to rise in all precincts and a strong uplift in leasing activity seen in the end of 2021 has continued into the new year.
Average prime rents have risen throughout the city between 3.4% and 2.4% over the past two quarters. The trade coast, an economic development area stretching up Queensland’s coast, lead the charge in rent increases of 7.2% and 3.4% over the past two quarters.
Across Brisbane, net face rents averaged $130 sqm pa in the North, $155 sqm pa in the Trade Coast, $120 sqm pa in the South, $120 sqm pa in the West and $105 sqm pa in the M1 Corridor.
It was a record breaking year for the Sunshine State in industrial transaction volumes, with Queensland totaling $1.4 billion in sales in 2021. The figure marked yet another all-time-high for the state which has broken its record each consecutive year since 2015.
Land and building values within the state also shot up, increasing by 54% and 32% respectively, while incentives for properties over 4,000 sqm have compressed by an average of 31 percentage points.
“We saw industrial land and building values jump across Brisbane in the past six months, due to an uplift in leasing activity and strong investment volumes,” said Jake McKinnon, Queensland’s Research Manager at Cushman & Wakefield.
“With incentives starting to compress for the first time in two years, it’s clear that tenant demand is strengthening.”
Jake McKinnon, C&W QLD Research Manager
Melbourne’s West outshines precincts
In Melbourne, industrial vacancies have hit a historical low of below 2% and land absorption continues to be rapid. As a result, land values have been pushed up considerably across all Melbourne precincts.
Melbourne’s West is the most notable example, with values for land parcels over 5,000 sqm having increased by over 100%.
Average face rents have also grown over the past six month, ranging from 6% to 9% growth. The West has again recorded the most substantial growth, experiencing an increase of 12% to $16.
Investment was also significant throughout the state, totaling $994 million in the past six months.
“Despite rental uplifts in most Melbourne markets, surging tenant demand and increasingly scarce supply are leading to stable or compressing yields,” said Glenn Lampard, Victoria’s Research Manager at Cushman & Wakefield.
“We expect industrial sales in all precincts to now achieve sub-4% yields, and investors are seeking shorter lease terms to take advantage of future anticipated rental increases.”
Glenn Lampard, C&W VIC Research Manager