Property Australia

Demand abound as industrial rental growth takes off in first quarter

PROPERTY AUSTRALIA May 3, 2022

A long-anticipated jump in rental growth for industrial assets across Australia has been showcased by JLL's 1Q 2022 statistics, which pinned industrial rental growth has been the greatest in more than 25 years.

Prime net face rentals climbed by 3.2 per cent year on year in the first quarter, the highest quarterly rise since June 1994. This comes after a solid second half to 2021, with year-on-year (y-y) growth of 9.9 per cent.

Over the previous 12 months, JLL Research has observed double-digit prime net rental increase in 11 of the 21 precincts examined nationwide, and double-digit secondary nett rental growth in 16 of the 20 precincts tracked nationally.

JLL’s Senior Director and Head of Industrial & Logistics Research – Australia, Annabel McFarlane said demand is coming from all angles.

“We recorded nationally 4.4 million square meters of gross take up in 2021,” she said. “It's nearly but not quite double the long-term average pre-pandemic levels that you get every year."

“The Ecommerce story is very significant. But we're seeing the growth in demand across industrial, manufacturing and other sectors as well.

“There's also restructuring of supply chains, because one thing that the pandemic completely illustrated is that how vulnerable supply chain shocks markets are. So there's a lot of groups trying to get that right, which is creating movement and expansion and reassessing supply chain networks."

“And then part of that story - is there a need to onshore either goods and inventory, or maybe materials for your manufacturing processes."

“We need more stock, and it's not it’s not a trend that's going to go away quickly.”

industrial rents

Prime net face rentals are increasing across the country, with several regions experiencing double-digit face yearly rental increases. In Sydney, Perth, and Adelaide, incentive levels are in the single digits.

“The immediacy of demand is driving even strong rental growth for well-located stock close to major road networks. Secondary net face rents have increased by over 20 per cent in Melbourne’s North and West precincts and Sydney’s Outer Central West,” JLL’s Head of Industrial & Logistics - Australia, Peter Blade said.

“However, though there is plenty of activity in the new build market in Melbourne and Sydney, developers with land holdings have had mixed results depending on the precinct they are operating in, benefiting from strong pre-lease rental growth in Sydney’s Outer South West (+8.3 per cent y-y) and in Melbourne's South East (+9.9 per cent y-y).”

McFarlane said many firms are looking for high quality locations that will reduce transportation costs while delivering sustainability upsides. 

“If you can get your location rights, you reduce your carbon emissions through your transport networks,” she said. "There's going to be an increasing focus on the right infill locations going forward.”

Tags: Renting, Growth