An increase of supply across the next 12 months is unlikely to push up Australia's industrial vacancy rate, according to new data from JLL.

In What is the True Industrial Vacancy Rate?, JLL’s Director of Industrial Research Sass J- Baleh notes that the country has experienced relatively strong occupier demand for the industrial space throughout the past few years, particularly across the eastern seaboard cities, where the vacancy rate if 3.8 per cent is "consistent to Asian markets such as Beijing and Tokyo.”

“The relatively lower take up activity levels in the Sydney market largely reflects the lack of floor space availability with the average vacancy rate at 2.6 per cent- the lowest in Australia," she said.

Data from JLL indicates new industrial completions are expected to double in 2020 after reaching their lowest level since 2010 last year.

But Ms Baleh said Australia's current vacancy of 5.9 per cent is unlikely to be significantly impacted by the uptick in supply, most of which will be delivered in Melbourne where 42 per cent of the 2020 development pipeline is already pre-committed to the largest occupiers within the transport, postal and warehousing sector. 

Source: JLL

"Growth in non -discretionary retail goods segment including food, beverages and medical supplies will contribute to most of the long-term demand for industrial and logistics space, with discretionary retail expenditure (i.e. largely encompassing the eCommerce sector) playing a supporting role," she said.

“The production, storage and distribution of consumer staple goods in Australia will grow due to strong domestic population growth, more importantly, through global demand influences particularly within the Asia-Pacific region and the world’s emerging markets.

“Consumer staples has been a major driver of Australia’s gross domestic product (GDP), representing around 15 per cent of exports, which has a major impact on industrial and logistics demand.”  

The leading global economic growth, rapid urbanisation and the growing middle-class population occurring in the Asia -Pacific region is set to play a pivotal and positive role in influencing the demand for Australia’s exports in the medium to long run. 

Ms Baleh predicted the eastern seaboard vacancy rate of 3.8 per cent to remain, if not fall, as the supply pipeline began to taper off post-2020.

“If the Western Australian economy begins to rebound throughout the next year then Perth vacancy levels may also begin to decline, which would, in turn, see Australia’s average vacancy rate fall below 5.9 per cent by the end of 2020 and early 2021.”

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