JLL’s 4Q 2022 Research figures have recorded another above average quarter with 689,260 sqm in gross take up of logistics and industrial space. Though this is the lowest quarterly reading for the 2022 calendar year, it is above the 15-year quarterly average of 606,100 sqm. 

JLL’s quarterly research figures show Gross State Product (GSP) weighted prime net face rents increased by 2.9% quarter-on-quarter nationally over 4Q22, substantially above average quarterly growth, following very strong rental growth of 9.3% q-q in 3Q22 and 6.1% q-q in 2Q22. 

This brings annual rental growth for 2022 to 22.9% y-y, the highest since the start of JLL’s time series in 1989. 

Sydney precincts recorded the steepest rises in prime net face rents 

• Outer North West ($172 per sqm +31.0% y-y), 
• Outer South West ($170 per sqm, +38.6% y-y), 
• Outer Central West ($186 per sqm, +36.8% y-y) 

These precincts have recorded strong quarterly rental growth ranging from 1.5% quarter-on-quarter for the Outer North West to 3.8% quarter-on-quarter for the Outer Central West in 4Q22. Low vacancy and the immediacy of occupier requirements resulted in 8.4% q-q for secondary assets in Outer Central West in 4Q22. ($169 per sqm, +40% y-y) 

Brisbane was the most active leasing market in 4Q22 with 32 transactions >3,000 sqm totalling 316,000 sqm bringing the yearly total to 777,000 sqm in 2022, setting a new demand record for the market. Secondary asset rental growth outperformed prime in all Brisbane precincts. 

In Melbourne gross industrial take up moderated in 4Q22 to 183,000 sqm for the quarter and was below the 15-year quarterly average for the first time in four years. 

JLL’s Head of Industrial & Logistics - (Australia) Peter Blade said, “Though rental growth is slowing, and the heady levels of double digit quarterly rental growth being pushed through the market in the September quarter are behind us, lease negotiations remain in favour of landlords. Rents are either stable or increasing in all markets and incentives continue to tighten in most markets. 

“Throughout 2022, the extreme scarcity of space options has resulted in steep rental increases and declining incentives but also examples of tenants settling for leases for buildings that are much smaller or much larger than required or in non-preferred locations often on short lease terms,” said Mr Blade. 

JLL’s Head of Strategic Research - (Australia) Annabel McFarlane said, “We expect conditions to ease for tenants in 2023, rental growth rates to moderate and declining incentives to stabilise. Developers have responded to rapidly rising rents and elevated demand, with significantly above average levels of construction, which means more choice and flexibility for occupiers and a more balanced market.”

Approximately 2.6 million sqm of stock completed in 2022. This was a record year for completions nationally but also for prelease take up (1.8 million sqm). However, over 700,000 sqm remained vacant at year end and JLL is tracking 1.95 million sqm of new under-construction projects due for completion in 2023, including close to 920,000 sqm being constructed on a speculative basis. 

Ms McFarlane said, “The level of speculative development is elevated as some developers choose to derisk projects by avoiding construction delays and cost escalation risks associated with bespoke developments for pre-leased occupiers given current uncertainty around construction input costs. 

“Stock under construction and due to complete in 2023 is above average in Sydney (706,000 sqm), Melbourne (622,560 sqm) and Brisbane (630,560 sqm) markets,” said Ms McFarlane.