Vacancy rate to drive industrial rents higher in 2023

Super-prime warehousing refers to modern facilities built in the last six years with high clearances and strong green credentials – the types of facilities sought after by most major companies.

According to CBRE, about 4.6 million square metres of warehousing is due to be built over the next two years, but half of this is already pre-committed.

“We expect that even if demand weakens significantly in 2023, there is still not enough supply to satisfy space requirements from major occupiers that are setting up their activities and supply chains for the long-term servicing of the Australian population,” said Sass J-Baleh, CBRE’s head of Industrial & Logistics Research Australia

End-of-year figures from the commercial agency show Sydney maintained its status as the world’s tightest industrial property market, after the vacancy rate for buildings 5000 square metres and bigger fell to 0.2 per cent from 0.3 per cent mid-year.

The picture was little better across the other five major capital cities, which collectively recorded a 0.6 per cent vacancy rate, down from 0.8 per cent.

This spurred a 23.5 per cent rise in super-prime rents as occupiers battled it out for what little space remained available.

While the 2.8 million square metres-worth of warehouse space absorbed in 2022 was well down on the record 4.2 million in 2021 and 3.2 million in 2020, this was due to a lack of serviced and zoned land ready to be developed, rather than a drop in demand, Ms J-Baleh said,

Rising construction costs and supply chain issues, which have resulted in delays, placed added pressure on supply, she said.

Amid the ongoing warehouse squeeze, global building materials manufacturer Ardex has signed a 20-year lease to occupy a 26,265-square-metre logistics facility at Frasers Property Industrial and Aware Real Estate’s The Yards Estate at Kemps Creek in Sydney’s west.

Under construction and due to be completed by the third quarter of 2023, the facility will consolidate Ardex’s NSW operations and act as its regional support office for its 10 manufacturing sites within Australia and New Zealand.

It will include a 40-metre-high manufacturing tower used to mix raw materials, a 20-metre-high silo area for storage of liquid materials and a 3500 square metre three-storey office and training facility.

The 118ha The Yards estate is now over 76 per cent committed to technology, pharmaceutical, manufacturing and freight, and logistics users.

Frasers is targeting a six-star Green Star rating for the Ardex facility, which will include a 1.7ha installation of solar panels to provide its energy needs.

In another big pre-leasing deal, this time in Horsham in regional Victoria, Melbourne-based developer and construction firm Pellicano will build a 9852 square metre research and development facility for WA state government-backed cereal breeding company InterGrain.

InterGrain has committed to a 20-year initial lease of the specialist facility at 142-150 Stawell Road. Construction will kick off in the first quarter of 2023 and the facility is due to be completed later in the year.

On the development front, Dutch-based refrigerated logistics specialist NewCold will spend $240 million building its first cold storage facility in Sydney, after launching in Melbourne in 2016 and completing specialist sheds used by the likes of McCain’s, Fonterra and Peter’s Ice Cream.

Construction on the first of two stages – a frozen pallet warehouse that can hold over 80,000 pallets – is due to begin in early 2023 in the NSW government’s Marsden Park industrial precinct.