INDUSTRIAL vacancy has hit a historic low of 2.24% in the country’s major cities, with both the industrial and logistics displaying a strong recovery from 2020 turbulence.
According to CBRE’s Industrial & Logistics Vacancy Report for H1 2021, the total vacancy rate across Australia’s five major cities has hit a historic date for both the industrial and logistics sector, down from H2 2020’s 2.95%.
“Demand for industrial and logistics space continues to rise with the national vacancy rate sitting well below 3%, underpinned by stable, long-term factors, said Sass J-Baleh, head of industrial & logistics research at CBRE.
Over the six months that include the fourth quarter of 2020 and the first quarter of 2021 net absorption of 4,000sqm-plus industrial assets was 1,733,316sqm in Sydney, Melbourne, Brisbane and Perth.
“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,” added J-Baleh.
Sydney recorded the lowest vacancy rate at 1.40% down from 2.79% in H2 2020, with net absorption practically halving with 738,325sqm of supply.
In Melbourne the vacancy rate fell by 1% to 1.54%, following a net absorption of 653,365sqm of supply.
“More than 60% 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,” said J-Baleh.
Meanwhile in Brisbane the vacancy rose from 2.56% in H2 2020 to 2.90%, with a net absorption of 192,626sqm.
In Perth vacancy fell to 4.30% from H1 2020’s 5.01%, with a net absorption of 149,000sqm of supply.
Adelaide’s vacancy was recorded for by CBRE’s report for the first time in this half at 3.20%, with net absorption figures not yet released.
“In 20 years, I have not witnessed such vast volumes of leasing enquiry. This has not been restricted to the major east coast markets, either, with South Australia and Western Australia also experiencing record leasing demand,” added J-Baleh.
Activity in the industrial and logistics sector is largely being driven by the accelerated penetration of e-commerce, which is now making up around 13% of total retail sales across the country.
CBRE predicts that an additional 2,500,000sqm of logistics space will be needed over the next five years to keep up with the continuing growth of online retail, with 2020 already seeing a record high of 1,000,000sqm net absorption in the sector.
“Demand from e-commerce will continue to be transformational,” said J-Baleh.
“The current supply pipeline indicates a shortage of new space to meet that demand, so we expect capital and rental value uplift to continue.”