Vacancy in Brisbane’s industrial market rises due to supply, despite tenant activity remaining strong

Tenant activity in Brisbane’s industrial market remained strong in Q1 but backfill created by strong supply completions has seen vacancy rise sharply, according to the latest research from Knight Frank.

Knight Frank’s Australian Industrial Review Q1 2024 found there was 196,000 sqm of take up in Q1 2024, up 6% from the previous quarter and in line with the five-year average. More than half of the leasing activity came from pre-commitments (104,290 sqm).

Knight Frank Head of Industrial Logistics in Queensland Mark Clifford said manufacturing users were the most active over Q1 accounting for 45% of take up, followed by retailers (25%) and transport users (15%).

“Of the Eastern Seaboard cities, Brisbane saw the biggest take up over Q1, while Melbourne and Sydney saw a 43% and 60% drop respectively, largely due to a lack of precommitment deals.

“Despite the relatively strong take up over Q1, strong supply completions in Brisbane has seen vacancy in the industrial market rise significantly, leading to greater options for tenants.”

Available industrial space increased 50% from 309,073sq m in Q4 2023 to 462,979 sqm in Q1 2024.

This was in line with the trend across the industrial market on Australia’s eastern seaboard, with Melbourne’s vacancy increasing by 454,513 sqm, ahead of Brisbane (+153,906 sqm) and Sydney (+151,703 sqm).

The research found vacancy in the country’s industrial market was back to early 2021 levels from the recent extreme lows, doubling across the Eastern Seaboard over Q1 this year to reach 1.49m sqm.

“Available space in Brisbane’s industrial market has effectively doubled from the extreme lows of early 2023 and is back in line with the levels of early 2021,” said Knight Frank Partner, Research and Consulting Jennelle Wilson.

“The development pipeline for 2024 is sitting at 936,000sq m, on-track to match the record 909,000 sqm of completions in 2023.

“Despite the increase in vacancy rents have remained stable, edging up marginally by 0.4% in Q1 to be up by 6% over the year to $158 per square metre net, while average incentives have also stabilised at 11 to 13%.

“Looking ahead, the gap between prime and secondary rents is expected to widen. Recently it was common for secondary assets to achieve rents very close to prime levels, but this is expected to become the exception rather than the norm over 2024.

“Prime 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.”

Mr. Clifford said in terms of transactions in Brisbane’s industrial market, the breadth of purchasers and the size of industrial deals had begun to increase in Brisbane.

“While private investors are still active in the sub-$30 million price bracket, this quarter also saw the participation of syndicators and institutional capital in the market,” he said.

The Knight Frank research found prime yields in Brisbane’s industrial market remained stable through Q1 at 6.25%