Industrial vacancy rates have trended down in Brisbane by 1.8 per cent over the past quarter – the second consecutive fall recorded for Brisbane, according to Knight Frank’s latest Brisbane Industrial Vacancy Research report.
According to Knight Frank’s Head of Industrial, Australia, Greg Russell, despite vacancy remaining above average, the total vacancy is beginning to respond to a lull in backfill space and a reduction in new sub-lease space.
“Take-up of vacant industrial space was strong over the majority of 2015, following a slow start in the first quarter of the year. Enquiry levels have remained patchy, with solid periods of enquiry followed by quieter times in the market.
“Demand has continued to arise from transport and 3PL users, as well as those companies related to the building industry,” said Mr Russell.
According to the report, the level of available space within the Brisbane Industrial market decreased by 11,818 square metres over the past quarter to sit at 640,996 square metres as at January 2016.
“In tandem with the reduction in total vacancy, the time on the market has reduced slightly across the available space to currently average 15.1 months.”
The level of prime space fell by 8.8 per cent over the quarter to 313,511 square metres, with absorption of prime space dominating the quarter.
In contrast the secondary space available increased by six per cent to total 327,485 square metres over the final quarter of 2015.
All available industrial space is split relatively evenly between prime (49 per cent) and secondary (51 per cent), according to the report.
[urbanRelatedPost][/urbanRelatedPost]Mr Russell said available space remains dominated by warehouse-style buildings, according for 81 per cent of the total. “In line with the reduced expenditure in the resource sector, manufacturing and metal fabrication demand has remained subdued. This has impacted demand for vacant space.
“Manufacturing stock has a current time on the market of 20.2 months, in comparison with warehouse stock, which averages 13.5 months,” said Mr Russell.
Knight Frank’s Senior Director, Research, Queensland, Jennelle Wilson, said three precincts recorded significant falls in vacancy in the final quarter of 2015.
“TradeCoast was down 18 per cent; the Greater North was down 18.9 per cent; while the South West was down 21.5 per cent. Knight Frank recorded a total reduction in available space of 62,978 square metres.
“The other three precincts balanced out these figures, recording increases with the North up 8.9 per cent; South up 18 per cent and South East up by 12.8 per cent – meaning that the overall reduction in vacancy was only modest,” said Ms Wilson.
According to Ms Wilson, “Despite the total vacancy decreasing over the past two quarters, the level is still at historically high levels and the market continues to favour tenants.
“Market rents are showing a softening trend with discounting of advertised face rents and incentives firmly in the market.
“Increasingly, landlords are accepting that rents on new leases will be lower than the passing rent from existing leases which had fixed reviews.”
“This has extended to making strong offers to sitting tenants, who had been considering relocation, in order to maintainn an income stream over the asset and avoid vacancy.”
Ms Wilson said the forecast new supply for 2016 appears to be in line with that of 2015, with a number of the ‘proposed’ projects to potentially be deferred into 2017.
“Investment market conditions have remained solid for prime assets, with yields sub-seven per cent for modern, long weighted average lease expiry opportunities. Although, yields for assets with exposure to vacancy have appeared to plateau.
“These high prices achievable for new, long-leased assets has continued to spur both speculative development and low pre-commitmente rents, which will create further backfill space – although not at the pace that was seen in early 2015.
“While the vacancy appears to be trending down and take-up has remained strong, the market rents remain soft,” concluded Ms Wilson.