CBRE Industrial & Logistics and Research teams have compiled their second National Vacancy Report, which includes Adelaide for the first time says Jordan Kies CBRE State Director of Industrial & Logistics in South Australia. 

The industrial and logistics vacancy rate in Adelaide has been calculated for the first time, and stands at 3.20% for 4,000sqm-plus assets amid a period of significant demand.

The report covers a six-month period across Q4 2020 and Q1 2021, with the vacancy rate in Australia’s major cities tightening from 2.95% to 2.24%.

While Adelaide’s industrial vacancy rate has not been calculated before in this detail, Jordan Kies, CBRE’s State Director of Industrial & Logistics in South Australia, noted the significant activity across the state.

“Accelerated industrial and logistics demand within Adelaide over the past 12 months has largely been fuelled by South Australia’s strong food and beverage, defence, mining, high-tech manufacturing and health sectors,” Mr Kies said.

“This buoyant business confidence has encouraged tenant expansion and amalgamation, with flight-to-quality also being a major component of the investment decision-making process.

“Additional evidence suggests that there was heightened penetration of new entrants in the Adelaide industrial market over this same period, further demonstrating the increased demand.

“The majority of industrial land across metropolitan Adelaide has now become fully absorbed after extended periods on the market pre-COVID, with many wondering where future industrial development land will materialise to meet the elevated demand levels.”

The CBRE report includes a new net absorption metric, which documents the changes in total stock levels and vacant space.

While Adelaide’s net absorption total will be calculated for the first time in the H2 2021 report, the existing four-city national figure of 1,733,316sqm roughly equates to the suburb of Mile End.

“With a diversified economic base, South Australia is well placed and truly on the national radar from both a leasing and investment perspective,” Mr Kies added.

“All sub-regions have been major beneficiaries, with increased land sales activity and very low supply of new emerging land driving up land prices.

“Strong leasing demand coupled with low vacancy rates is creating more D&C activity, good tenant retention and rental growth prospects, while there is also increased investment appetite and a continued sharpening of yields.”

Increased occupier demand in sectors such as e-commerce, distribution and logistics and data centres has driven industrial and logistics demand around Australia, in conjunction with a pause on speculative developments amid the uncertainty of COVID-19.

“The industrial and logistics market has bounced back with considerable vigour following the COVID-related challenges of 2020,” said Cameron Grier, Regional Director of CBRE Industrial & Logistics in Pacific.

“In 20 years, I have not witnessed such vast volumes of leasing enquiry. This has not been restricted to the major east coast markets, either, with South Australia and Western Australia also experiencing record leasing demand.”

To request a copy of the CBRE National Vacancy Report please contact one of the CBRE agents via the contact forms at the bottom of this article: 

NATIONAL OVERVIEW

Cameron Grier, Regional Director – Pacific, Advisory & Transactions Services – Industrial & Logistics

“The industrial and logistics market has bounced back with considerable vigour following the COVID-related challenges of 2020.

“In 20 years, I have not witnessed such vast volumes of leasing enquiry. This has not been restricted to the major east coast markets, either, with South Australia and Western Australia also experiencing record leasing demand.

“In 2020, e-commerce experienced five years of growth in just 12 months, and now accounts for around 13% of all retail sales in Australia. There is still a long runway for growth in this area to catch other APAC countries, where the proportion of online sales typically ranges between 20% and 30%.

“This, coupled with the fundamental rethink of how occupiers deal with inventory levels, has created considerable momentum in the industrial and logistics sector in 2021.

“From an occupier’s point of view, the expected tightening of vacancy across all markets means that they now need to start thinking about their moves much earlier to ensure the continuity of their supply chains.”

ADELAIDE COMMENTARY

NORTH

Vacancy rate: 2.2%

Jordan Kies, State Director – South Australia, Advisory & Transactions Services – Industrial & Logistics

“New construction activity in Adelaide’s northern precinct is contributing to the attraction and retention of blue chip tenants, with the likes of the Metcash Distribution Centre – a Charter Hall development – the Woolworths Distribution Centre expansion, ADX Depot, Sigma, Toyota Material Handling and Huhtamaki.

“The land supply is now fully absorbed and as a result we expect to see a continued trend of low vacancy in this precinct. There is a solid weighting of good quality A-grade buildings with minimal vacancy, which puts the precinct in good stead for tenant retention, rental growth and yields.”

NORTH WEST

Vacancy rate: 2.2%

David Reid, Senior Director, Advisory & Transactions Services – Industrial & Logistics

“The north west has been Adelaide’s traditional industrial location, given its proximity to primary freight and distribution networks. With the overall upswing in demand, we have seen a significant tightening of supply of existing stock across all property grades.

“Land supply, already constrained due to the lack of development-ready land, is now extremely limited, with the remaining available sites quickly acquired over the past six months. We have seen the emergence of speculative construction as a result, as landowners look to capitalise on the supply shortage and strong demand dynamic.

“Interphase issues with residential development in some of these established areas – particularly the inner north west – continue to frustrate industrial property requirements, especially given the growth in 24/7 logistics requirements as well as the return of manufacturing activity to South Australia.

“Overall, however, we are seeing a reduction of incentives and marginal growth in rental rates. The dearth of available vacant possession stock is also resulting in capital value growth as buyers compete for opportunities in this low-interest rate environment.”

SOUTH WEST

Vacancy rate: 2.4%

Cass Applebee, Negotiator, Advisory & Transactions Services – Industrial & Logistics

“Since the outbreak of COVID-19 there has been a significant uplift and positive growth within Adelaide’s e-commerce-focused retail industrial market, as businesses shift their focus online.

“There is also a rebirth of manufacturing across sectors including high-tech, automation, heavy industry and food and beverage. The inability to import products and materials was evident during the height of the pandemic, which has shifted the focus to ensure self-sufficiency at a local and national basis.

“The inner south to south-western industrial areas from Edwardstown through to St Marys and surrounds is home to a number of established businesses that have outgrown their functionally-obsolete buildings. Many of these sites are land-locked, impeding expansion, and in some cases are destined for re-zoning to residential or commercial. The high demand and shortage of supply of industrial stock in the market has shifted the focus for occupiers to source land and develop.

“Land located in the south of Adelaide – namely Lonsdale – has been slow to move in recent years but has now had an influx of activity, so much so that we are running out of available development sites. Tonsley Innovation District has recently released large parcels of land at a time where there are limited options available.”

OUTER NORTH

Vacancy rate: 6.5%

Jon Nitschke, Associate Director, Advisory & Transactions Services – Industrial & Logistics

“In the past 12 months there has been activity at a level not experienced in 15 years in the outer north, with the perfect storm of a strong industrial market and the completion of major road infrastructure to the area.

“Walkers Vicinity Estate is on the verge of sell out, with pre-commitment to Stage 3 prior to completion and land rates lifting from $90/sqm to $130/sqm in the past 12 months. Major transport businesses are now relocating to the estate after previous resistance, encouraged by the area’s connectivity and hive of activity.

“It’s the same story for Edinburgh Parks, with the majority of allotments now committed and new facilities under construction, or nearing completion, for Auscold and M3 Logistics. CBRE has also commenced marketing the 13,000sqm former SA Structural premises on Kaurna Avenue with strong interest to date.

“Smaller vacancies in Edinburgh Parks, such as the 2,500sqm Rocla facility on Kaurna Avenue, have also generated strong enquiry, with a 10-year lease agreed within four weeks. Interest in the area is expected to be sustained, however limited land supply will slow pre-commit development as available parcels dry up.”

WEST

Vacancy rate: 11.9%

Anthony De Palma, Negotiator, Advisory & Transactions Services – Industrial & Logistics

“The inner west precinct has become the hot spot for Adelaide developers in the past 24 months, with vacant land opportunities snapped up and developed into small office/warehouse units.

“Vacancy is limited in the area due to the high percentage of owner occupiers. In the coming year, we anticipate older, dilapidated facilities will be demolished and redeveloped, as there are no vacant land opportunities left in the area.

“Demand for smaller 250-500sqm units is very strong, driven by investors purchasing assets for self-managed super funds, local small-to-medium sized trade businesses and national groups. These sales prices are reflecting $2,750-$3,000/sqm +GST for a fully-furbished office/warehouse with net leasing rates ranging from $170-$190/sqm + GST.”

To request a copy of the CBRE National Vacancy Report please contact one of the CBRE agents via the contact forms below.