Stock shortage fuels strong rental increases in Adelaide industrial market

A lack of ready to occupy stock has underpinned strong year-on-year rental growth across Adelaide’s industrial & logistics market and spurred a range of speculative development projects.

CBRE’s Q1 Industrial & Logistics Figures report highlights that just 0.8% of Adelaide’s existing stock was vacant at the end of last year, which has helped drive rental growth.

To the end of Q1, y-o-y growth in super prime face rents hit 14.9%, with prime rents recording even stronger growth of 24.4% and secondary rents increasing by 17.5%.

CBRE Industrial & Logistics Director Jordan Kies noted, “The continued low vacancy in South Australia is driving rental growth across our industrial sector. Our leasing market is currently in a transition period, where we are observing developers command higher economic rental rates for new-builds to make a development feasibility stack up. As tenant demand for quality stock continues, overlayed with our historically low vacancy rate, such higher economic rental rates will - and are starting to become - the ‘new norm’.”

Mr Kies noted that there was a distinct lack of new supply, particularly when it came to warehouses sized between 2,000sqm and 7,000sqm.

“Groups that are willing to ‘spec build’ have been the major beneficiaries, as occupiers tend to lean towards facilities that are nearing completion,” Mr Kies said.

“Secondary stock, particularly in core locations such as Port Adelaide, Wingfield, Regency Park and Gillman have also seen a significant uptick in rents, almost by default, given the low vacancy rate and limited number of spec builds nearing completion.”

CBRE’s Q1 report shows that 60% of Adelaide’s 88,451sqm supply pipeline for 2023 has already been absorbed following tenant precommitments.

Development activity is focused within the northern precincts of Adelaide, with these precincts providing efficient connectivity to major road infrastructure and Port Adelaide for shipping as well as the Obsorne Naval precincts for current and future Defence projects.