Brisbane’s industrial market had the highest rental growth of the Eastern Seaboard cities over Q2 despite a rise in vacancy, according to the latest research from Knight Frank.

Knight Frank’s Australian Industrial Review Q2 2024 found after remaining essentially flat in Q1, prime face rents in Brisbane saw a return to growth in Q2, jumping by 4.7% to be up 8% year-on-year to $165/sq m net on average, with rental growth across all precincts.

This was the highest quarterly and annual rental growth of the Eastern Seaboard cities, including Melbourne, which saw a 0.7% rise over Q2 and 7.7% over the past 12 months, and Sydney, where rents remained stable over Q2 and were up by 3.2% over the past year.

Secondary net rents in Brisbane also grew, up by 4.6% in the quarter (+7.4% y/y) to $146/sq m.

Knight Frank Partner, Research and Consulting in Queensland Jennelle Wilson said Brisbane’s rental growth had returned over Q2, despite a rise in vacancy with tenants still prepared to pay well for premises which enhance their business operations..

Industrial vacancy across Australia’s East Coast cities rose by 17% in Q2, to sit 7% above the 10-year average. 

Each city increased, with available space in Brisbane rising by 36% to 629,187sq m, putting vacancy back in line with the levels of 2020. 

Prime vacancy has grown to 362,033sq m in Brisbane, however more than half is from speculative space under construction with new starts of almost 100,000sq m in Q2. Secondary vacancy increased by 48% in the last quarter to 267,154 sqm and has more than trebled in the past year.

“Analysing newly vacant space to date in 2024, exactly half is backfill due to tenants relocating into newly built space,” said Ms Wilson. “A further 31% is speculatively developed with only 14% due to any contraction or relocation out of the market.

“The uplift in Brisbane vacancy stemmed from a surge in new speculative building starts and more availability in the secondary market, given a strong upgrading trend in the high supply environment.

“As the amount of secondary vacancy begins to weigh on the market tenants may well begin to select their location based on price rather than utility, thus expectations for future secondary rent remain modest. 

“In contrast, prime rental growth is expected to continue to be linked to economic rent and while pre-commitment activity remains high, this will continue to form the reference point for existing assets.”

The Knight Frank report found leasing activity in Brisbane’s industrial market over Q2 was 44% above the level of the previous quarter at 227,407sq m, and 17% above the five-year average. 

Annual take-up sits at 747,000sq m, 4% below the five-year average as the surge of demand has now returned to more normal market conditions. 

Knight Frank Head of Industrial Logistics Mark Clifford said tenant activity had remained at above average levels in Q2 with broad-based demand.

“Retail tenants dominated activity in Q2, making up nearly 40% of takeup, including Wurth and Q Automotive taking 20,542 sqm of speculative space in Crestmead,” he said.

“In general, car retailers and delivery partners are particularly active in the market both for improved and hardstand facilities. 

“Transport users accounted for 29% of activity while wholesale tenants were slightly quieter at 10%.

“Almost half of leasing activity in Q2 came from existing stock as higher vacancy provides greater opportunity for tenants to act.

“Prime existing take up of 46,609sq m was only just behind secondary at 64,876sq m.

“Tenant focus on new stock remains a key theme with precommitments making up 33% of activity and speculative 17%.”

More Knight Frank readings 

Sales activity in Adelaide’s industrial market picks up steam Knight Frank | The Industrialist

Investment liquidity in Australia’s industrial market is lifting - Knight Frank

Why is industrial still one of the most favoured sectors for investors? - Knight Frank

Cross-border investments in Asia-Pacific are projected to rise in H2 2024 - Knight Frank 

Land values and rents continue to strengthen in Perth’s industrial market - Knight Frank | The Industrialist