Australia’s national average industrial and logistics vacancy rate has increased to 2.5% in the second half of 2024 but remains one of the lowest levels globally. 

CBRE’s H2 2024 Australia’s Industrial and Logistics Vacancy Report showed the vacancy rate lifted for all major markets. Melbourne recorded the biggest increase and now sits at 3.6%.

The report noted that since hitting an all-time low of 0.6% in the first half of 2023, the national vacancy rate has trended upward, though remains relatively low in a global context. Throughout 2024, increases in vacant space continued with a notable uptick across the Eastern Seaboard.

Vacancy rates for H2 2024 sit at 2.1% in Sydney, 2.8% in Brisbane, 1.6% in Adelaide and 1.4% in Perth. 
CBRE’s Head of Industrial & Logistics and Data Centre Research Australia and Director of NSW Research, Sass Jalili noted the vacancy rate data aligned with expectations of increases across all markets while remaining below the 4% ‘equilibrium’ level.

“Vacancy rates have moved up slower than anticipated for the Sydney market – only edging up by 10bps over the past six months. A ‘flight to quality’ trend, similar to the office market, was evident, with demand for good quality assets in core locations, as well as for infill and last-mile locations,” Ms Jalili added.

Looking ahead, Ms Jalili said the bifurcation in vacancy rates across precincts and resulting rental growth observed over the past year was expected to continue into 2025.

“We believe most of the rise in incentive levels has occurred over the second half of 2024, and we anticipate a more moderate rate of growth in incentives throughout 2025. Over the medium to long term, Australia’s supply of serviced zoned industrial land will remain constrained, and this will continue to play a role in a limited development supply pipeline. This scarcity, combined with Australia’s expanding net exports, e-commerce sector, and strong population growth, will continue to support the long-term growth of the sector.”

Michael O’Neill, Regional Director Pacific Industrial & Logistics and Managing Director of Western Sydney said there was increased confidence from both investors and occupiers in the second half of 2024.

“Throughout 2024, face rents have remained stable, though there has been upward pressure on incentives across all markets. Incentives have increased, and owners have become more flexible with capital contributions, early access, and, in some instances, bank guarantees,” Mr O’Neill said.

“The letting up period in nearly all markets has increased by three to six months, but it’s encouraging to see that take-up has improved significantly. Buildings that have been vacant for six months are now being leased at the asking rent, though it is just taking more time in a more normalised market.

Looking ahead, Mr O’Neill said the forecast was for a slow start to 2025. 

“Consumer and occupier demand will continue to be linked to interest rates, so we expect the leasing activity to be relatively slow in the first half of 2025 but stronger than it was in the first half of 2024.”

Sydney

In Sydney, the vacancy rate remained relatively steady with only a very slight increase to 2.1% in the second half of 2024. 

Sub-lease space represents around 24% of the total vacant area in the Sydney market (for space >5,000 sqm) and over the past six months new sublease volumes have declined. 

CBRE’s National Director, Industrial & Logistics Cameron Grier said Sydney’s vacancy remained stable throughout the year.

“We witnessed a shift in vacancy across the outer ring precincts with the vacancy rates falling in the Outer North West from 3.7% to 2.6% with speculative building and sub-lease space being taken up. Almost the mirror scenario played out in the Outer South West with vacancy falling from 3.2% to 2.4%. This tightening is quite remarkable with leasing volumes around 50% down on the same period in the prior year due to 3PL users being largely dormant,” he said.

“The tightening in the outer ring markets was somewhat counter balanced by the infill areas, with an increase in the Central West from 0.3% to 2.7% and in South Sydney from 1.6% to 2.3%. CBRE are not expecting the same volumes of sub-lease to occur in 2025 as we saw this year which should see vacancy rate stabilise and may also put downward pressure on the Sydney vacancy rate for the new year.”

Melbourne

In the second half of 2024, vacancy rose across all Melbourne precincts. 

CBRE State Director Thomas Murphy said Melbourne’s average vacancy rate was 3.6% with the West precinct having the highest vacancy rate, which contributed just over half of Melbourne’s total vacant floor space.

“Occupier demand throughout Melbourne has remained subdued throughout the second half of 2024, with the amount of leasing transactions remaining resilient albeit average deal size is down from previous years,” he said.

“As we enter 2025, tenant demand for super-prime grade assets in core locations will be the key driver of occupier activity, impacting vacancy rates over the coming 12-months.”

Brisbane

In Brisbane, vacancy increased marginally in the second half of 2024 with the greatest upward movement in Near City, South, and North precincts. The largest fall in vacancy was in the Western Corridor.

CBRE State Director Matthew Frazer-Ryan said the 2024 calendar year was characterised by weaker occupier demand, compared to the buoyant previous years, as evident by lower take-up levels.

“Despite this, there were numerous requirements seeking space for both greenfield and brownfield solutions, which led to a relatively balanced supply market,” he added.

“A large volume of speculative development completions have been pushed into the first half of 2025 – many of these new developments are currently reporting positive interest, underpinning our forecast for improved occupier demand into 2025,” Mr Frazer-Ryan said.

Sublease space in Brisbane continued to decline, representing only 5% of total vacant space.

Perth

Perth vacancy is the lowest in Australia, with an increase of just 0.2 percentage points in the second half of 2024. 

CBRE Senior Director Jarrad Grierson noted that development completions in the second half of 2024 were above average which contributed to the vacancy increase.

“High population growth and a strong performing WA domestic economy had led to high levels of leasing activity in the second half of 2024, which is expected to see the increase in vacancy stabilise into 2025.

“However, high levels of pre-leasing activity in 2024 is expected to create backfill space towards the end of 2025 as these projects are completed. Tight stock availability within sub-5,000 sqm of stock could lead to speculative development activity in this part of the market and create additional supply towards the end of 2025,” Mr Grierson added.

Sub-lease space in Perth represents 10% of the total vacant space for buildings with NLA of  >3,000 sqm.

Adelaide

Adelaide recorded the second lowest vacancy rate in the country, with just a slight increase in the past six months.

CBRE State Director Paul McKay noted vacancy increased in all precincts except in the West and North West which recorded declines of 0.9 percentage points and 0.4 percentage points respectively. 

“Although occupier demand in the Adelaide market remains healthy, a softening in demand for larger premises has been evident, with logistics users less active in response to reduced stress on supply chains and dampening consumer spending,” Mr McKay added. 

“The construction pipeline is somewhat constrained, with land value growth and yield expansion causing challenges for speculative development. This should see rent growth for existing stock being sustained, although the rapid growth seen recently appears to be moderating.”

Looking ahead, Mr McKay said the Defence sector looked to be a significant driver of future growth in the longer term, particularly in Adelaide’s North West and Outer North precincts.