Renter Growth Opportunity

Occupiers of prime warehouse space in Australia's capital cities have an exciting opportunity ahead as indicated by analysis conducted by CBRE. The study reveals a significant increase in rents over the next 12 months. Examining the relationship between vacancy rates and rental growth in major cities worldwide, the analysis shows that cities with vacancy rates below 4% experienced an impressive average annual increase of 14.2% in industrial rents. This is particularly good news for occupiers in Australia, as the country has the lowest industrial vacancy rate in the Asia Pacific region, highlighting its strong and vibrant market.

Leading the way with the lowest vacancy rates in the country are cities like Sydney and Perth, with rates of 0.3% and 0.4% respectively. These ultra-low vacancy rates, driven by the booming e-commerce industry's rising demand and limited supply due to construction delays and land scarcity, have already resulted in a remarkable 27% surge in rents over the past year. The positive momentum is expected to continue, with the ongoing lack of vacancy fueling the next wave of rental growth, especially in Sydney, Perth, and Melbourne.

Melbourne, in particular, offers occupiers a promising outlook, with a 23% year-on-year increase in rents already observed and an additional 13% growth forecasted over the next 12 months. The city's relative affordability compared to other capital cities, combined with its status as home to Australia's largest container port and robust population growth, makes it an attractive destination for businesses.

While Sydney has the highest industrial rents in the country, there is still room for optimism. CBRE's analysis reveals that Sydney is not among the top 10 most expensive cities globally to operate in, suggesting the potential for further rent increases. While occupiers may approach higher rents cautiously, it's important to recognize that the market's lack of available space is driving this positive trend.

Overall, the outlook for occupiers of prime warehouse space in Australia's capital cities is undoubtedly positive. With the prospect of substantial rental growth driven by strong demand and limited supply, businesses have a unique opportunity to thrive in this dynamic market.

Source: https://www.afr.com/property/commercial/low-vacancy-rates-to-lift-industrial-rents-by-another-14pc-20230621-p5di8w