_Brisbane predicted to have the strongest industrial rental growth in 2024
Brisbane is predicted to have the strongest industrial rental growth next year, on par with Sydney, at 6%, according to the latest research from Knight Frank.
The real estate consultancy’s Australian Horizon Report 2024 found Brisbane is expected to have the second highest industrial rent growth over 2023, at 16%, behind Sydney at 20%, and is expected to see growth of 6% in 2024 and 4% in 2025.
Forecast average prime rent growth in major cities:
| Sydney | Melbourne | Brisbane | Perth | Adelaide | |
| 2022 | 29% | 19% | 16% | 46% | 14% |
| 2023 | 20% | 10% | 16% | 3% | 10% |
| 2024 | 6% | 4% | 6% | 4% | 3% |
| 2025 | 4% | 3% | 4% | 3% | 3% |
The report found that despite substantial growth in industrial rents over the past three years in Australia, they still have further to rise, with one reason being the relatively low proportion of rents compared to total operational costs for users, with increases also passed on to end consumers in most cases.
The second reason industrial rents have the capacity to rise further is that in Australia, they are by no means out of line with the level of rents in comparable cities globally, most of which have also seen a sharp rise in rents in recent years, according to Knight Frank’s Australian Horizon Report 2024.
Despite expectations of ongoing industrial rental growth in 2024, growth will be more moderate, and in line with this Knight Frank’s recently released Australian Industrial Review Q3 2023 found the pace of quarterly rental growth had eased across all markets over Q3 as vacancy increased.
Brisbane recorded prime industrial rental growth of two per cent over Q3, behind Sydney (3.2%) and Melbourne (3.1%), while average incentives in Brisbane stabilised at 11% to 13%.
Availability across all East Coast capital cities increased by 30% over Q3 2023, according to the Knight Frank research, but vacancy was still 52% below the level of two years ago.
In Brisbane vacant space increased 31% to be 343,128sq m, but remains 45% below the recent early 2021 peak.
Knight Frank Partner Research and Consulting in Queensland Jennelle Wilson said in contrast to overall vacancy, existing prime industrial vacancy in Brisbane fell by 26% to a tight 31,436sqm over Q3.
“Vacancy has lifted from recent extreme lows, but much of the increase over Q3 came from secondary space, with vacancy in this category more than doubling to 150,752sq m, which is still tight,” she said.
“This is almost exclusively backfill space for tenants who have upgraded to prime or newly built space.
“Speculative space available increased by 14% with new construction starts of 64,883sq m. Speculative space now accounts for 47% of total vacancy, with 12% in completed speculative projects and 35% under construction.”
Across the East Coast, available speculative space accounts for 42% of total vacancy, which is more than double the 10-year average.
Knight Frank Head of Industrial Logistics Queensland Mark Clifford said record supply in Brisbane of around 865,000sq m in 2023 – well above the previous high of circa 550,000sq m in 2008 – had given tenants more options.
“Leasing take up is down from recent frenetic levels, but it was steady in Q3 in line with the quantum of the previous quarter at 190,170sq m, with sentiment largely unchanged,” he said.
“Annual take-up sits at 855,000sqm, still 16% above the five-year average.
“A broad range of users are active, but transport, postal and warehouse tenants remain the most active, making up 34% of take up over the past 12 months with ongoing expansions and upgrades.
“Tenants are now taking a more measured approach to determining their space needs with higher rents.
“While supply – and choice for tenants – has risen, with available supply still set to remain tight for the foreseeable future, rental growth is expected to continue, albeit at a slower pace.
“In the short term, incentives on new product may increase as owners seek to stretch or maintain elevated face rents. A wider range of reported incentives is expected as tenants face strong competition on some assets, while income security is sought on others.”
The Knight Frank research found with almost 400,000sqm of pre-commitments in place for delivery in 2024 and continued appetite for speculative development, 2024 is also expected to see a high level of completions in line with, or potentially higher, than the 2023 new supply in Brisbane.
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For further information on the residential market in Australia, please contact:
Jennelle Wilson
Partner, Research & Consulting, QLD