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Industrial property vacancy in Australia hits a record low in 2021

Categories: Commercial, Industrial

According to one of the country’s leading property research groups, Australia’s industrial property vacancy rate has hit a historic low of 2.24 per cent.

According to CBRE, Australia’s industrial property market vacancy rate has hit a record low of 2.24 per cent.

Thanks to a significant amount of occupier takeup, the net absorption (the sum of the square feet that became physically occupied minus the sum of square feet that became physically vacant during a specified period) for assets over 4,000sqm in our major cities totalled 1,733,720sqm through the six-month period to Q1 2021.

It shouldn’t surprise commercial property pundits, with the rise of industrial and logistics real estate demand a common headline in real estate publications. eCommerce is driving a significant need for logistics companies across our country, largely thanks to the pandemic turning retail foot traffic into online spending. Online retail now accounts for 13 per cent of Australia’s total retail sales. The result is significant takeup in the industrial sector to satisfy delivery requirements.

Sydney recorded the lowest industrial vacancy rate (1.40 per cent) while Melbourne is a close second (1.55 per cent).

Leasing enquiries are the strongest in almost two decades, experts say. And the activity isn’t confined to major precincts on the east coast, as many would expect.

Perth, still glowing from starting 2021 as an economic powerhouse against the coronavirus, has watched its industrial vacancy rate fall to 4.30 per cent. Consumer confidence is at an all-time high, and with jobs growth defying gravity, a mining sector comeback, commodity price levels skyrocketing, a series of infrastructure projects locked in for the state, and population growth set to top the country in the next five years, demand for WA industrial real estate investments is likely to continue.

Meanwhile, Brisbane and Adelaide recorded respective vacancy rates of 2.90 per cent and 3.20 per cent.

Demand for industrial assets is typically being led by transport, postal, warehousing, and logistics sectors.

industrial real estate vacancy

Industrial land demand skyrockets

In April 2021, JLL noted that demand for industrial land was already the equivalent to two-thirds of the entire takeup of 2020. Occupier demand totalled 72,900sqm for the first three months of the year.

Investors can expect this trend to continue, as Australia looks to catch up to other APAC countries whose online retail accounts for up to 20 per cent and even 30 per cent of total retail sales.

Australia lags behind, with online retail accounting for 13 per cent of the country’s total retail sales. But, thanks to COVID-19, the introduction of eCommerce to many Aussies who’d once preferred traditional shopping methods means thousands of more online shoppers have entered the market – and will stay there. It’s expected online consumers will grow despite bricks and mortar stores reopening their doors. The industrial property sector will only benefit.

The competition for industrial assets has resulted in yield compression across all grades. In fact, institutional capital looking for a home has been redirected to alternative asset classes, with some big players divesting from industrial and pouring funds into the office sector.

Singapore’s largest holder of industrial and office property, Ascendas REIT, is divesting some of their industrial stock on the eastern seaboard, selling three assets totalling $125 million with the proposed divestment expected to be completed in 2021’s third quarter.

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