Industrial Demand Hits Five Year High


Industrial property has remained one of the few winners to emerge from the global pandemic with the volume of industrial space leased in Australia lifting to a five-year high in the second quarter of the year.

According to figures compiled by JLL, national take-up levels of industrial floorspace have so far reached 1.4 million square metres over the first six months of 2020.

Approximately 871,000 square metres of industrial floorspace was leased nationally between April and June, dominated by Sydney, which accounted for 55 per cent of the space leased, with 34 per of deals occurring in Melbourne.

“Given the strong take-up levels across Australia’s eastern seaboard cities, the second quarter vacancy rate for the east coast is relatively low—averaging 5.3 per cent,” JLL head of industrial and logistics Jamie Guerra said.

“National average prime rents also remained relatively unchanged over the quarter.”

National industrial gross take-up

National Industrial Gross Take-up by City

^ Source: JLL, 2009 to 2020 (as at 2Q20)

JLL director of industrial research Sass J-Baleh said demand for consumer staples and the growth in online retail trade was driving the strong demand for industrial leasing with 50 per cent of transactions coming from within the eCommerce and food sectors.

“It is the consumer staples sector which has driven the stability of the industrial and logistics sector during Covid-19 and will continue to be the long-term driver of growth,” J-Baleh said.

“Historically, supermarkets have been a low eCommerce penetration sector.

“However, we are likely to see the growth in online grocery shopping increasingly contribute to the acceleration of Australia’s eCommerce growth trajectory.”

Leasing deals were also bolstered by a deal between internet behemoth Amazon and logistics real estate player Goodman Group—one of the few A-REITS to re-affirm its 2020 earnings forecasts— which is set to lease a 200,000sq m fulfilment centre in Sydney.

Investment activity continued during the quarter with around $1.2 billion in sales occurring for transactions over $5 million.

The largest deal was the sale of the $648 million Aldi portfolio to a joint venture between Charter Hall and Allianz—representing the second-largest industrial transaction in Australian history.

Charter Hall also boosted its industrial portfolio by 60,000sq m after securing two new Coles distribution centres in a deal worth $400 million.

Improving industrial sentiment has also seen a large number of transactions and approvals in recent weeks including Charter Hall’s $210 million Sydney acquisition, Pelligra Group’s $100 million plans in Melbourne and Dexus’ $173 million portfolio expansion.

At the same time, Coles and Woolworths announced they would lease state-of-the-art automated and semi-automated warehouses in Sydney and Melbourne.

The focus for industrial sites will now be cast to Sydney's outer west following the NSW government's recent approval to rezone of a new 850-hectare industrial precinct to be part of Sydney's emerging “third city” of Badgerys Creek.

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