Take up in Brisbane’s industrial market eased slightly over the second quarter of 2023 as occupiers took stock, but rental growth is set to continue, according to the latest research from Knight Frank.

Knight Frank’s Australian Industrial Review Q2 2023 found vacant space in Brisbane’s industrial market increased 15 per cent over Q2 to be 261,166sq m, but remains 16 per cent below that of one year ago.

Much of the increase in vacancy was due to further new speculative construction starts, with 140,843sq m of space available across projects completed and under construction. This is a 25 per cent uplift in the quarter.

Speculative space now accounts for 54 per cent of total vacancy, with the majority of this (42 per cent) coming from speculative space still under construction.

The report found leasing activity in Brisbane’s industrial market over Q2 was 15 per cent lower than for the previous quarter at 192,846sq m as deals took noticeably longer to conclude, but this was still five per cent above the five-year average.

Annual take up was just under one million square metres, which was still well above the average annual levels.

Knight Frank’s Australian Industrial Review found Brisbane prime rents grew by three per cent over Q2 2023, behind Adelaide (five per cent) and Sydney (four per cent).

Annual growth for Brisbane prime rents is now sitting at 24 per cent, behind Sydney (39 per cent) and Perth (27 per cent).

Secondary net rents increased by 2.7 per cent in the quarter to $136 per square metre and 27 per cent over the year.

Knight Frank Partner, Head of Industrial Logistics Queensland Mark Clifford said take up in Brisbane’s industrial market had moderated slightly, with few options for tenants and deals taking longer to complete.

“Despite a lower volume this quarter, underlying demand remains,” he said.

“Leases are still commonly finalised six to nine months prior to existing stock becoming vacant, due to the sustained pent up demand.

“However, as occupancy costs have grown users have become more analytical in determining their space requirements with the frenetic ‘grab what space is available’ of late 2022 and into 2023 moderating to a more measured process.”

Knight Frank Partner, Research & Consulting Queensland Jennelle Wilson said the drive for efficiency continued to boost demand, particularly from 3PL users.

“Transport, postal and warehouse users were the most active tenant type, with 31 per cent of take up over the rolling 12 months, with 3PL users still demonstrating strong demand,” she said.

“While rents continue to grow, incentives have stabilised at 11 to 13 per cent on average, as more tenants are accepting a higher face rent but demanding more incentives with greater financial engineering emerging in larger tenant negotiations.”

Ms Wilson said with 394,344sq m of new supply completed in the first half of 2023, Brisbane’s industrial market was well on track to deliver a record level of supply of 868,530sq m this year.

She said the 2024 pipeline was also growing, with expectations of delivery now above 900,000 square metres.

“Labour shortages and costs remain the largest hurdle to supply completions, keeping pressure on economic rents,” she said.

“This new supply has not delivered any material easing in the market to date, with backfill space spoken for.”

A national view

Knight Frank’s Australian Industrial Review Q2 2023 found vacancy was sitting at 526,806sq m across the Eastern Seaboard cities of Sydney, Melbourne and Brisbane, which was 36 per cent below the same time last year.

However, available space increased by 19.5 per cent in Q2, with an uptick in Melbourne and Brisbane, while Sydney tightened further.

Sydney’s vacancy fell by 27 per cent to 32,175sq m, while Brisbane’s availability increased by 15 per cent to 261,166sq m and Melbourne’s vacancy increased by 37 per cent to 233,465sq m, with this city now accounting for 44 per cent of total East Coast vacancy.

The Knight Frank research found the quarterly pace of rent growth slowed in all markets except Adelaide over Q2 but annual increases remain high with Sydney, Perth and Brisbane all seeing growth above 20 per cent, and further rental growth is expected.