10 September 2020
Industrial and logistics have recorded varying vacancy rates across Australia’s major cities, from a high of 3% in Melbourne to a low of 1.8% in Sydney. 

CBRE has launched a biennial data set, the first of its kind, that assesses industrial and logistics vacancy (in facilities over 4,000sqm in size) in Sydney, Melbourne, Perth and Brisbane, with Adelaide to be included in future reports.

CLICK TO VIEW VACANCY REPORT

Supply across all NSW leasing markets remains tight, so the slight dampening in demand in Q1 and Q2 has had minimal impact to rents and incentives. However, some owners have been prepared to be more aggressive for renewals and new deals given the uncertainty in the market. There will be more leasing activity in Q3 2020 than in Q3 2019, so we are confident we’ll see strong leasing fundamentals leading into 2021.

NSW capital markets demand continues to increase post-30 June, as buyers focus on reweighting to logistics. Transactions were subdued in the first half of the year; we are now seeing an uptick in transactions, which bodes well for the lead into 2021. As always, core product remains very tightly held, which is encouraging most investors to acquire land and build out quality assets.

Industrial Vacancy Report Map graphic

OUTER NORTH WEST
Cameron Grier  
Regional Director - Pacific, Advisory & Transaction Services – Industrial & Logistics

Vacancy for core product remains low at around 1.5%. New supply through speculative building will be limited over the next 12 months with approximately 40% of all speculative developments put on hold. Since January 2020, face rentals have remained solid in Sydney’s outer north west market, while we have started to see an increase in incentives levels and softening in annual review structures. Leasing demand remains strong, particularly for enquiry on space over 20,000sqm.

NORTH SHORE
Geoff Hunt  
Director, Advisory & Transaction Services – Industrial & Logistics

The north shore industrial and office park markets have experienced steady activity over Q1 and Q2 2020. The Macquarie Park office park precinct vacancy rate sits at 4.5% with over 20,000sqm of new transactions being completed during the first half of 2020. Similarly, the traditional industrial markets of Artarmon, Lane Cove, Chatswood and Northern Beaches have experienced strong lease activity over the same period with vacancy falling below 4%, with each of these precincts continuing to experience rental growth driven by lack of availability for good quality stock.

SOUTH
Nathan Egan  
Managing Director - South Sydney, Advisory & Transaction Services – Industrial & Logistics

South Sydney can be divided into two distinct markets: port precinct and north of Sydney Airport.

The northern precinct has around 160,000sqm available at present, the highest vacancy in the past 10-years. This has been driven by significant rent increases over the past three to five years, driving out traditional industrial users in favour of more client focussed users – trade, automotive, entertainment, food and beverage, last mile and e-commerce. The take up if space by these users has not kept pace with the rate of withdrawals. We expect to see incentives increase in this market, and rents decrease slightly until a significant portion of this vacancy is leased.

The port precinct has minimal vacancy, driven by tenant relocation from the northern market in favour of the more attractive prices within the port (circa 20-30% cheaper) without sacrificing any operational efficiencies benefits. There has been an increase in sub-lease space as several larger users reposition their warehousing facilities. We expect rents to remain stable in the port precinct, incentives may increase slightly under COVID-19 market conditions.

Leasing transactions have stalled over the past two to three months due to hesitation in the marketplace. Enquiry and activity have been quite strong, we expect a number of transactions to occur before the end of the year.

CENTRAL WEST
Michael O’Neill  
Senior Director - NSW, Advisory & Transaction Services – Industrial & Logistics

The central west market vacancy is at an all-time low of 1.5%, with several larger active requirements likely to drive vacancy below 1% by Q4 2020. The low vacancy rates, and demand for last mile locations, will support circa 80,000sqm of speculative stock in 2021. Some of these projects were temporarily on hold in Q2 2020 due to COVID-19 however vacancy rates, recent transactions and enquiry levels have given developers comfort to proceed speculatively.

OUTER SOUTH WEST
Tom Rourke  
Director, Advisory & Transaction Services – Industrial & Logistics

Whilst there is a significant amount of secondary vacancy in South West Sydney, there is very little large-scale A-Grade vacancy. Given the reduced amount of speculative development in 2020, due to COVID-19, we expect this trend will run into 2021. There is approximately 70,000sqm of A-grade leasing availability at Moorebank Logistics Park, which includes a new 51,000sqm facility that will reach practical completion in November 2020. Considering the current vacancy rates versus tenant absorption, stalled development projects and limited upcoming expiries, CBRE anticipates A-Grade supply levels over the next 6-24 months will remain low.

INNER SOUTH WEST
Keegan Ridings  
Director, Advisory & Transaction Services – Industrial & Logistics 

Tenants and purchasers that have previously been located outside of the inner south west are now considering this market due to the M5 Motorway upgrade and several newer strata developments and larger warehouse developments. This is evidenced by Altitude Business Park in Bankstown and Moorebank Logistics Park in Moorebank.

METROPOLITAN WEST
Elijah Shakir  
Senior Director, Advisory & Transaction Services – Industrial & Logistics

Predominately, we are seeing secondary market vacancy, with the majority being manufacturers and tightly held private ownership. Current vacancies are generally due to building inefficiencies including lower building heights, high hazard sprinkler systems and limited loading areas. Several older manufacturing sites have been purchased by institutional ownership, which is seeing a resurgence of new institutional style holdings that were leased prior to practical completion. 

COVID-19 has resulted in several new vacancies, due to a rise in sub-lease vacancy. 

We expect to see rents stabilise and incentives push from 15-20% in some instances. Secondary assets will be heavily discounted on rents as new institutional buildings are developed. The metro western Sydney market is extremely well located and is the new centre of western Sydney, at least 10km east of Eastern Creek and Kemps Creek developments. Also, land values are likely to increase in the area as land is tightly held and limited in supply.
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