Industrial rents surge 30 per cent in Sydney as supply shrinks
Record low vacancy rates have sent industrial rents soaring 30 per cent across most of Sydney and more than 20 per cent in Melbourne over the past 12 months, according to September quarter data tracked by commercial real estate firm Cushman & Wakefield.
In South Sydney – a last-mile logistics hotspot – rents for warehouse space between 5000sq m and 10,000sq m are up 43 per cent to $270-300 per sq m, while for larger logistics facilities in the precinct, rents have risen 49 per cent to $260-290 per sq m.
Such has been the surge in rents in Sydney (where the vacancy rate is just 0.3 per cent) that the city now has the fastest growing industrial rental market across the Asia Pacific, outpacing rental growth in 31 other tier 1 and tier 2 markets across the region including Tokyo, Singapore and Hong Kong, according to Cushman & Wakefield.
“Industrial rental markets are highly landlord favourable,” said Cushman & Wakefield’s joint head of industrial sales and leasing for Victoria, David Norman.
“With extremely low vacancy and sustained demand, rents are growing at rates not seen in many years and faster than most markets across Asia Pacific.”
A report by CBRE covering the first six months of the year recorded the national industrial vacancy rate at just 0.8 per cent compared with a global average at the end of June of 2.7 per cent, making Australia the tightest industrial rental market in the world.
Vacancy is likely to remain at record low levels for the foreseeable future, according to a new third quarter report from CBRE, which found construction delays and rising costs had combined to reduce Australia’s 2022 supply pipeline of new industrial and logistics space across the five major capital cities by 600,000sq m to 2.1 million sq m – nearly a quarter of the original forecast.
Construction delays stemming from wet weather and labour shortages, and rising costs based on material shortages and supply chain disruptions, have delayed some projects by up to one year, with some cancelled, according to CBRE.
“Occupier demand continues to outstrip supply in most capital cities,” said Cameron Grier, CBRE regional director for industrial and logistics in the Pacific.
“Developers are simply not able to bring on space swiftly enough. For some projects, this is adding up to delays of six to 12 months.”
In Melbourne’s south-east, prime rents have risen almost 20 per cent to $130 per sq m over the past six months while in the west, they are up 22 per cent over the 12 months to September, according to Cushman & Wakefield.
At the same time incentive levels have tracked lower, averaging between 5 per cent and 15 per cent.
Among the landlords benefiting from a strong occupier market is Singapore’s Frasers Property Industrial, which secured global tyre manufacturer Goodyear as the first customer at its $300 million Vantage Yatala estate on the Gold Coast.
Nasdaq-listed Goodyear has committed to leasing a 25,250-square-metre distribution facility for its Total Tyres business on a seven-year term.
“The deal marks a major milestone as the first pre-commitment for the estate, and we are continuing to receive significant interest from a number of light manufacturing, warehousing and logistics companies,” said Troy Whalan, general manager – Queensland, for Frasers Property Industrial.
