Sydney Standout in industrial vacancy rate with fall to 1.4 per cent
Sydney Standout in industrial vacancy rate with fall to 1.4 per cent
The industrial vacancy rate across Australia has fallen to historic lows on the back of a strong eCommerce demand and a supply rethink. 2.24% is the total vacancy rate across the five major Australian cities, which represents a fall from 2.95% as recorded back in Q2 2020.
Sydney’s industrial vacancy rate halved to a record low of just 1.4 per cent over the six months to the end of March as rising online retail sales and increased stockpiling by companies battling the supply-chain squeeze drove a surge in the take-up of warehouse space. It was a similar story in Melbourne, where the vacancy rate plummeted to 1.55 per cent from 2.55 per cent over the same six-month period thanks to net absorption of 653,365sqm.
Through the six months across Q4 2020 and Q1 2021, the net absorption of 4000-square-metre-plus industrial assets in Sydney, Melbourne, Brisbane and Perth was 1,733,316 square metres. The net absorption figure combines the changes in total stock levels and vacant space and has been calculated for the first time by CBRE’s Industrial & Logistics and Research teams for the H1 2021 Industrial Vacancy Report.
By comparison, office vacancy rates rose to 11.9 per cent in Sydney and 13.2 per cent in Melbourne in the six months to January, according to the latest Property Council Office Market Report.
The squeeze in Australia’s two biggest industrial markets combined with low vacancy rates in Brisbane, Perth and Adelaide pushed the vacancy rate across Australia’s five major cities to a new record low of 2.24 per cent at the end of March, down from 2.95 per cent at the end of September last year, according to a new report by CBRE.
According to Domain’s senior research analyst, Dr Nicola Powell, the sustained low vacancy rates across the smaller capitals mean that conditions will remain tight for tenants, with strong competition putting pressure on asking rents.
Industrial Vacancy Rate
| CITY | H2 2020 VACANCY | H1 2021 VACANCY | NET ABSORPTION |
| Sydney | 2.79% | 1.40% | 738,325sqm |
| Melbourne | 2.55% | 1.55% | 653,365sqm |
| Brisbane | 2.56% | 2.90% | 192,626sqm |
| Perth | 5.01% | 4.30% | 149,000sqm |
| Adelaide | N/A | 3.20% | N/A |
Source: CBRE
CBRE’s newly appointed head of industrial and logistics research, Sass J-Baleh, said record low industrial vacancy rates were underpinned by stable, long-term factors. “These include the structural shift to online retail and its role in creating greater activity among logistics and transport operators, the rise in the need for data centres, and the growth in the non-discretionary retail sector, which supports the expansion of food manufacturing and logistic operators, as well as the demand for cold storage space,” Ms Sass J-Baleh said.
“More than 60 per cent of the supply expected to be delivered in 2021 and 2022 has already been pre-committed, and therefore we expect vacancy rates to remain relatively low over the next 18 months.”
“That includes the structural shift to online retail and its role in creating greater activity among logistics and transport operators, the rise in the need for data centres, and the growth in the non-discretionary retail sector, which supports the expansion of food manufacturing and logistic operators, as well as the demand for cold storage space,” she said.
According to CBRE, the take-up of space from the e-commerce sector reached an all-time high last year with the absorption of 1,000,000sq m of logistics space. The firm expects an additional 2,500,000sq m will be required over the next five years to support the growth of online shopping in Australia.
“In 2020, e-commerce experienced five years of growth in just 12 months, and now accounts for around 13 per cent of all retail sales in Australia,” said Cameron Grier, regional director of CBRE industrial & logistics in the Pacific. “There is still a long runway for growth in this area to catch other Asia-Pacific countries, where the proportion of online sales typically ranges between 20 and 30 per cent.
“From an occupier’s point of view, the expected tightening of vacancy across all markets means that they now need to start thinking about their moves much earlier to ensure the continuity of their supply chains,” Mr Grier said.
References
- Sydney industrial vacancy rate falls to 1.4 per cent
By Larry Schlesinger
- Industrial vacancies at a record low
By Liam Wignell
- Industrial and logistics vacancy rates hit historic lows
By Rhys Prka
- Falling vacancy rates signal return to cities: Domain
By Bianca Dabu