Brisbane was the only capital city on Australia’s East Coast to record a fall in industrial vacancy over the fourth quarter of 2023, according to the latest research from Knight Frank.

Knight Frank’s Australian Industrial Review Q4 2023 found industrial vacancy fell by 10% (24,055sq m) in Q4 in Brisbane as pent up secondary demand reacted to greater levels of activity.

Meanwhile, Melbourne’s vacancy lifted by 18% and Sydney’s vacancy rose from 48,716sq m to 76,175sq m in Q4, despite this city remaining the tightest market, with vacancy at near record lows.

Despite a fall in vacancy over Q4, over the course of 2023 Brisbane’s vacancy was up by 41%. In Sydney vacancy was down by 15% at the end of 2023 compared to 12 months before, while in Melbourne it was up 63% year on year.

This comes in a climate of additional supply, which has not yet seen the vacancy return to normal levels of availability over across the East Coast.

The research found Brisbane saw the second highest prime industrial rental growth over 2023 at 15%, just behind Sydney (16%) and ahead of Melbourne (8.8%). Brisbane rents rose by 0.7% over Q4 2023.

Knight Frank Partner, Research and Consulting, Jennelle Wilson said industrial new construction delivered to Brisbane’s market had been at a record high in 2023 at 909,000sq m, significantly higher than the previous high of circa 550,000sq m in 2008, and double the 2022 level.

Despite this, vacancy had only increased slightly over the year, even as tenants were taking a more measured approach, she said.

“The vacancy low point is now in the past for this cycle,” she said.

“Prime vacancy was stable over the quarter at 192,229 square metres. There was an increase in existing prime vacancy of 10,000sqm to 41,537sqm.

“Available speculative space decreased by a similar amount to 150,692 square metres. Speculative space accounts for 49% of total vacancy, much of this (90,200sqm, 29% of total vacancy) is still under construction.

“Secondary vacancy fell by 22% in Q4 to 116,844sqm as secondary take-up grew in response to greater availability. Secondary vacancy is 29% higher than a year ago as vacancy begins to return to more normal levels.”

The research found the record new supply in Brisbane’s industrial market over 2023 had the potential to be matched in 2024, with up to 1 million square metres slated to come on line.

Knight Frank’s Head of Industrial Logistics in Queensland Mark Clifford said leasing activity over the fourth quarter of last year had been in line with the levels of the previous quarter at 181,570sq m.

“There was steady leasing take up in Q4, despite more moderate levels over 2023, with tenant demand stabilising from recent highs,” Mr Clifford said.

“Take up is still five per cent above the five-year average but down from the 1 million-plus square metres we saw a year ago, when there was frenetic activity.

“Transport occupiers were once again one of the most active tenant types in Q4.

“Much of this transport take up came from pre-commitments including Freight Specialists (12,000sq m), Blue Water Shipping (15,000sq m) and an undisclosed 26,000sq m user.  

“Manufacturing based tenants were also active with 19% of take-up in Q4, including the precommitment of Australian Brushware to 11,200sqm in Carole Park.

“Rental growth is expected to remain flat through the first half of 2024 before being drawn upwards by economic rents again in the second half of the year.”

Brisbane’s industrial investment market saw $973 million in turnover in 2023, with relatively few large-scale transactions. Sydney was the most actively traded market among the major cities, with turnover in 2023 being $4.6 billion, followed by Melbourne at $2.4 billion.

“With private investors still the strongest purchaser class, the assets receiving the most traction continue to be sub-$20 million with access to short term rental reversions,” said Mr Clifford.

“We have seen some recovery in investor sentiment noted through the start of 2024 due to greater financial market stability.”

The research found prime yields were stable at the end of 2023 at 6.25%.