The unprecedented demand for industrial and logistics borne out of COVID-19 has been revealed in new data from CBRE, which shows the need for purchases to be made online has contributed to occupiers expanding their business capacity in Australia

According to the firm's Industrial & Logistics Vacancy H2 report, a tight vacancy has underpinned this performance, with demands for their services likely to increase beyond the pandemic period.

Sydney industrial vacancy by region. Source: CBRE

Sydney

Research from CBRE indicates supply across all NSW leasing markets remains tight, with the slight dampening in demand in Q1 and Q2 having a minimal impact to rents and incentives.

However, the data also shows some owners have been prepared to be more aggressive for renewals and new deals given the uncertainty in the market.

The report forecasts more leasing activity in Q3 2020 than in Q3 2019, as NSW capital markets demand continues to increase post-30 June and buyers focus on reweighting to logistics.

"Transactions were subdued in the first half of the year, but we are now seeing an increase, which bodes well for the lead into 2021," the report states.

"As always, core product remains very tightly held, which is encouraging most investors to acquire land and build out quality assets."

Melbourne industrial vacancy by region. Source: CBRE

Melbourne

CBRE Industrial & Logistics Senior Director for Advisory & Transaction Services, James Jorgensen, Victoria’s overall vacancy is low, mainly due to the fact most speculative development has been placed on hold, which has slowed down transaction volume.

"The vacancy in Melbourne’s west is predominantly made up of short-term sublease space, a direct flow on effect of COVID 19 and the impact it is having on some of the 3PL and warehousing occupiers who have surplus space," he said.

"Therefore, the total vacancy number is not a true reflection of the market, but an interesting trend that we are only seeing in the west market given the large amount of 3PL occupiers."

He said CBRE was anticipating more subleasing opportunities to come to the market as some of the COVID-19 stimulus packages cease, but that there "was still a healthy amount of enquiry" in the market that gives us confidence of fast absorption.

"Melbourne’s North has a large vacancy rate, but half the total space comes from two significant vacancies being the old Ford and Woolworths sites," he said 

"The south-east vacancy number is at an all-time low, mainly because there has been limited speculative activity over the last two years, which is generally what stimulates movement in the market."

Brisbane industrial vacancy by region. Source: CBRE 

Brisbane

CBRE Industrial & Logistics Senior Director for Advisory & Transaction Services, Peter Turnbull said supply was decreasing across Queensland as the market experienced growing third-party logistics companies, e-commerce, warehousing and logistics groups.

"Speculative supply is mostly on hold amid pandemic-induced uncertainty, which is likely to result in an undersupply of 'A-grade' stock," he said.

"We anticipate that speculative supply will see an uptick in mid-2021 to accommodate increased demand. Currently, rental rates have remained flat and incentives are expected to decrease as supply tightens."

Statistics for Perth and Adelaide will be included in a separate article.

Click here to download the e-version of the report.

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