industrial-real-estate-a-red-hot-market-feature
Industrial property remains hot and rising as the signs of strength continue unabated. Image: Canva.
  • Demand continues to soar as supply remains scarce
  • Net face rents averaged $130 sqm pa in Brisbane
  • $385 million in sales were made in Sydney in Q1 2022

It’s great to start the week with a little wordplay, but what does the headline intend to point towards?

Across Sydney, Melbourne, and Brisbane’s industrial property market, demand is unending, rents are sharply rising, and while stock is coming online – it is far from fast enough – a story for the ages, then, and a story that continues.

Sydney industrial real estate

Cushman and Wakefield‘s Marketbeat Q1 2022 for the Sydney industrial market shows rising rents for well know reasons and one that could be expected but was perhaps not front of mind.

The report said prime net face rents in South Sydney moved up sharply for the past six months. While the reasoning was fairly predictable – scarce supply and robust demand, the report noted one other factor: “… [a] quality uplift following the completion of prime properties [lead to] charging higher rents.”

In numbers, the South Sydney market saw prime net face rents rise over 20% in the past six months, with the average cost per square metre per annum coming in at $216.

The Marketbeat said other Sydney markets were, “more-or-less stable”, with prices averaging $127 per square metre per annum in the North West, $131 sqm pa in the South West, $134 sqm pa in the Outer West, and $148 sqm pa in the Central West.

Transaction volumes for the final quarter of last year were $1.8 billion, and $385 million in the first quarter of 2022, with transaction volumes tending to be lower in Q1 than in other quarters.

Cushman and Wakefield said major transactions included the $152 million purchase of 286 Horsley Road by ESR Group from Leda Holdings and AirTrunk’s $110 million purchase of 51 Huntingwood Drive from Endeavour Energy.

The report also noted yields for stable, ranging from 3.0% to 4.5%.

Melbourne industrial real estate

Headlining the way for Melbourne seems to be two items: strength against the odds, and vacancy rates that would make lessees lumber and landlords elated.

The Marketbeat said leasing activity has been very strong for the past three years despite Covid, with land and building absorption double the post-GFC average; the report said there are no signs that will stop any time soon either.

“Vacancy in the form of existing and speculatively built product is at historic lows (below 2%).”

Cushman and Wakefield Marketbeat, Melbourne, Industrial Q1 2022

Face rental growth has also risen across most precincts and size ranges, year on year.

It came as no surprise stock shortage continues to put considerable upward pressure on land prices; the report also said it “… should translate into substantially stronger face and effective rental growth in coming years.”

Key sales for Q1 2022 and Q4 2021 included a $132.4 million, six property portfolio sale by Centuria Industrial REIT (ASX: CIP), four properties of which were in Melbourne; those were sold to CPE Capital. A $27.9 million sale by Australian Unity was made in the South East submarket, the property is located at 19 Corporate Ave in Rowville and was acquired by Blackstone.

Brisbane industrial real estate

It is much of the same for Brisbane, with leasing activity and enquiry continuing to move upward, along with a strong transaction market.

Cushman and Wakefield’s Marketbeat for Brisbane said first-quarter 2022 net face rents averaged $130 sqm pa for all property sizes in the North, with the Trade Coast coming in at $155 sqm pa, $120 sqm pa in the South and the West, and $105 per square metre per annum in the M1 corridor.

“Incentives for properties over 4,000sqm have started to compress across all precincts over the past six months, after 2 years of stability, compressing an average of 31 percentage points.”

Cushman and Wakefield Marketbeat, Brisbane, Industrial Q1 2022

Sales for Q4 2021 and Q1 2022 were headlined by a $116 million acquisition by GPT of 4 Enterprise Street in Ipswich; the seller was Ascot Capital. In the North submarkets, 66-98 Montpelier Road in Bowen Hills was acquired by Charter Hall from OPD for $60 million, and 9 Boron Street in Narangba was acquired by Dexus Industria REIT from a private seller for $46 million.



You May Also Like

Australia’s return to office continues to shine as the US stagnates at 50 per cent of pre-Covid levels

The Australian office market records improved office occupancy while the United States lags behind on the return to office.

Work from home is here to stay, and Australia’s secondary offices are at a turning point

Secondary office assets face challenges with poor uptake and declining values, especially in B and C-grade properties.

Why Australia needs more industrial assets to boost productivity and growth

A new report reveals that Australia’s industrial assets handle over $1.2 trillion worth of products annually.

Sydney’s retail sector continues to improve, with one area boasting zero vacancy

Vacancy rates for Sydney’s prime retail core have dropped to 8.3%, with the one area recording vacancy rates of zero.