Available space in Brisbane’s industrial market increased marginally over the first quarter of this year but the city still had the highest quarterly rental growth out of the Eastern Seaboard cities, according to the latest industrial research from Knight Frank.

The firm’s Australian Industrial Review Q1 2023 found available space in Brisbane was 226,592sq m at the end of Q1 2023, increasing for the first time in two years to be up three per cent, but still 33 per cent below that of one year ago.

Available space in Brisbane is significantly higher than the tightest industrial market, being Sydney with 43,759sq m, after recording a 51 per cent contraction, and Melbourne with 174,330sq m, with both cities reaching new lows in available space.

51 per cent of the remaining industrial available space across the Eastern Seaboard is now in Brisbane, with 39 per cent in Melbourne and just 10 per cent in Sydney.

Knight Frank’s report found industrial vacancy in the East Coast capital cities fell overall by 18% over Q1 2023 to a new record low of 444,681sq m.

The overall drop in vacancy across the Eastern Seaboard cities follows a 56 per cent fall over the 2022 calendar year, and an eight per cent fall over Q4 2022 to see vacancy sit at 547,748sq m.

Knight Frank Partner, Research and Consulting Jennelle Wilson said available space in Brisbane rose marginally due to an influx of new speculative development starts.

“Existing prime vacancy fell by nine per cent to 41,443 square metres but the increase in speculative space pushed total prime vacancy up by 20 per cent in the quarter from recent lows, but remaining 30 per cent down year on year.

“Speculative space now accounts for 40 per cent of total vacancy, with the majority of this – some 37 per cent - coming from speculative space still under construction.

“Secondary vacancy fell by 20 per cent in the quarter to 72,686 square metres to be 39 per cent below the levels of one year ago and reaching new record lows.”

Knight Frank Head of Industrial Logistics Queensland Mark Clifford said leasing activity in Brisbane’s industrial market had been strong over the first quarter of 2023, with transport and food and beverage suppliers the most active, followed by manufacturers and retailers.

“Elevated level of take up since 2021 have remained a key feature of the market,” he said.

“Take up over the first quarter of this year was 269,830 square metres, which was nine per cent higher than the previous quarter.

“Annual take up was 1.12 million square metres, the highest across the East Coast markets for the 12 months to April 2023.”

The report found that during Q1 the strongest take up was for pre-committed space, totalling 102,000sq m, followed by existing space (69,963sq m) and speculative developments (97,218sq m).

Take up was highest in the South West with 46 per cent of the quarterly activity.

Mr Clifford said rental growth had accelerated further in Brisbane’s industrial market with new stock setting the rental thresholds.

“The cost of new development has risen due to higher construction costs, and ongoing demand in the face of limited vacancy has also pushed rents higher,” he said.

“The strong competition amongst tenants for limited industrial space in Brisbane saw the city lead rental growth across the Eastern Seaboard cities over the first quarter of this year.

“Prime rents in Brisbane rose by 8.6 per cent, compared to 8.2 per cent in Sydney, 2.5 per cent in Adelaide, two per cent Perth and 1.5 per cent in Melbourne.”

The Knight Frank research found that prime rents in Brisbane had risen by 24.2 per cent over the past year to $149/sq m net.

Incentives have continued to contract at 10 to 12 per cent on average.

Moving forward, Brisbane is expected to have a record supply of industrial space delivered in 2023, with at least 843,000sq m to be built compared to the city’s long-term average of 357,940sq m.

In Sydney new developments are anticipated to reach 807,641sqm, while Melbourne will deliver approximately 845,231sq m.

“The increase in supply will help with industrial supply shortages, but it won’t completely alleviate it,” Mr Clifford said.

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