JLL’s 1Q 2022 Research figures have recorded the strongest industrial rental growth for more than 25 years.

Prime net face rents have increased by 3.2% quarter-on-quarter nationally over Q1 - the strongest quarterly result since June 1994. This follows a strong second half to 2021 resulting in year-on-year growth of 9.9%.

JLL Research has recorded double digit prime net rental growth over the last 12 months in 11 out of the 21 precincts tracked nationally and double-digit secondary net rental growth in 16 out of 20 precincts tracked nationally

JLL’s Head of Industrial & Logistics - (Australia) Peter Blade said, “Prime net face rents are accelerating across the country with double digit face annual rental growth in many markets. Incentive levels are falling to single digits in Sydney, Perth and Adelaide.

“The immediacy of demand is driving even strong rental growth for well-located stock close to major road networks. Secondary net face rents have increased by over 20% in Melbourne’s North and West precincts and Sydney’s Outer Central West.

“However, though there is plenty of activity in the new build market in Melbourne and Sydney, developers with land holdings have had mixed results depending on the precinct they are operating in, benefiting from strong pre-lease rental growth in Sydney’s outer south west (+8.3% y-y) and in Melbourne South East (+9.9% y-y). However, there has been little change over the year in Sydney’s Outer Central West, which includes the rezoned Mamre Road precinct and Melbourne’s North where land options are more plentiful, and developers compete to pre-commit occupiers,” said Mr Blade.  

JLL’s Senior Director and Head of Industrial & Logistics Research - (Australia) Annabel McFarlane said, “The strong rental growth results recorded this quarter will particularly please those that acquired assets over the last 18 months and new entrants to the market, with many underwriting acquisitions with aggressive rental growth assumptions.

“Many have looked to overseas markets as a lead indicator of rental performance in Australian markets. US and Canadian markets have recorded compound annual growth over the last three years (3yr-CAGR) to 4Q21, ranging from incredibly strong growth in Boston and Toronto (16% and 15.5% 3-yr CAGR respectively) and strong growth 5% plus 3yr-CAGR in numerous other locations.

“The scale of the rental growth recorded across precincts this quarter is indicative of business confidence, scarcity of immediately available options and the challenges of managing supply chains disruptions,” said Ms McFarlane.