Nation’s Industrial, Logistics ‘Tightest in World’

Australia’s industrial and logistics property market has reached a new record low of 0.6 per cent and is now the tightest in the world, according to CBRE Research.

Australia is facing a squeeze worse than the UK on 1.6 per cent and Hong Kong on 2.3 per cent, according to research conducted across the five major markets of Sydney, Melbourne, Brisbane, Perth and Adelaide.

At just 0.2 per cent, Sydney had the lowest vacancy rate of any major city in the world, followed closely by Perth on 0.4 per cent.

CBRE Australian head of industrial and logistics research Sass J-Baleh  said that lack of supply means vacancies will remain tight even if demand weakens in 2023.

“While vacancy rates in other countries remain low, we have begun to see a slight uptick in some offshore markets, mainly owing to a significant slowdown in the e-commerce penetration rate,” J-Baleh said.

“The Australian market is shaped by pent-up demand, with an immature-but-growing e-commerce sector and a chronic undersupply of industrial space, which will keep vacancy rates at extremely low levels.”

Strong demand has pushed face rents up 25.3 per cent year-on-year, in the supply-weighted average super-prime grade. Sydney hit a supply-weighted average of $200/sqm off a 38.1 per cent year-on-year increase.

Net absorption across the calendar-year figure reached 2,800,000sq m, above the 10-year average of 2,600,000sq m but well off the 4,200,000sq m of 2021. 

A recent $30-million Sydney transaction demonstrated the heat in the market. 

Brickworks rolled its 75ha Oakdale East Stage 2 site, near Western Sydney’s Aerotropolis, into a joint venture with Goodman. The site currently holds a quarry and brick plant, but will be converted into industrial and logistics facilities.

Managing director Lindsay Partridge said that a five-year buildout would result in a $1-billion uplift in value.

“Under the terms of our joint venture agreement, Goodman will provide funding, equal to the sale value of the site, for infrastructure and construction costs,” Partridge said.

The joint venture’s nearby Oakdale West Estate, which already hosts Amazon, is standing up 169,000m2 facilities for Xylem, Telstra, Woolworths, Coles, and Australia Post by the middle of 2023.

“As a result of continued strong customer demand, we are experiencing significant rental growth across our new developments and lease renewals,” Partridge said. 

“These trends have been reflected in the revaluation process, resulting in an increase in the assessed average market rental of 19 per cent, for the leased assets within the trust.”