Supply is rising in Brisbane’s industrial market, leading to an increase in vacancy rates, according to new research.
Knight Frank’s Australian Industrial Review Q1 2024 found there was 196,000sq m of take up in the first quarter of 2024 – a 6 per cent increase for the quarter.
The report found that more than half of the leasing activity came from pre-commitments (104,290sqm).
Knight Frank Head of Industrial Logistics in Queensland, Mark Clifford, said manufacturing users were the most active, accounting for 45 per cent of take up, followed by retailers (25 per cent) and transport users (15 per cent).
“Of the Eastern Seaboard cities, Brisbane saw the biggest take up over Q1, while Melbourne and Sydney saw a 43 per cent and 60 per cent drop respectively, largely due to a lack of pre-commitment deals,” Mr Clifford said.
“Despite the relatively strong take up over Q1, strong supply completions in Brisbane have seen vacancy in the industrial market rise significantly, leading to greater options for tenants.”
The report also found available industrial space increased 50 per cent from 309,073sq m in Q4 2023 to 462,979sq m in Q1 2024.
This was in line with the trend across the industrial market on Australia’s Eastern Seaboard, with Melbourne’s vacancy increasing by 454,513sq m, ahead of Brisbane (153,906sq m) and Sydney (151,703sq m).
The research found vacancy in the country’s industrial market was back to early 2021 levels from the recent extreme lows, doubling across the Eastern Seaboard over Q1 this year to reach 1.49 millionsq m.
Knight Frank Partner Research and Consulting, Jennelle Wilson, said available space in Brisbane’s industrial market has effectively doubled from the extreme lows of early 2023 and is back in line with the levels of early 2021.
“The development pipeline for 2024 is sitting at 936,000sq m, on-track to match the record 909,000sq m of completions in 2023,” Ms Wilson said.
“Despite the increase in vacancy rents have remained stable, edging up marginally by 0.4 per cent in Q1 to be up by 6 per cent over the year to $158square m net, while average incentives have also stabilised at 11 to 13 per cent.”
Looking ahead, she said the gap between prime and secondary rents is expected to widen.
“Recently it was common for secondary assets to achieve rents very close to prime levels, but this is expected to become the exception rather than the norm over 2024,” she said.
“Prime rental growth is expected to remain flat through the first half of 2024 before being drawn upwards by economic rents again in the second half of the year.”
Mr Clifford said in terms of transactions in Brisbane’s industrial market, the breadth of purchasers and the size of industrial deals had begun to increase in Brisbane.
“While private investors are still active in the sub-$30 million price bracket, this quarter also saw the participation of syndicators and institutional capital in the market,” he said.
The Knight Frank research found prime yields in Brisbane’s industrial market remained stable through at 6.25 per cent in the first quarter.
