Australia’s Industrial & Logistics vacancy rate has dropped to its lowest point in the modern era. In February’s MHD CBRE I&L experts explore this phenomenon affecting all major markets across Australia.

Total I&L vacancy rate across Australia’s five major cities has dropped to a historic low of 1.3 per cent as national net absorption surpasses 2 million sqm, new CBRE research shows.

Since the second half of 2019 (pre-pandemic) the national vacancy rate has been trending down, from 6.3 per cent in the second half of 2019 to a record low 1.3 per cent as at second half of 2021 (data up to and including December 1, 2021), demonstrating strong occupier growth and activity within the sector. 

Through the six-month period across 1H2021 and 2H2021 the national net absorption of 4000 sqm-plus industrial assets was up 30 per cent to 2.38 million sqm when compared to the first half of the year. 

The Sydney was the exception: experiencing a decline in net absorption due to lack of stock availability.

“Demand for industrial and logistics space continues on its upward trajectory, with the national vacancy rate sitting at a historic low, underpinned by stable, long-term factors, which is driving significant rental value uplifts across Australia,” says Sass J-Baleh, CBRE’s Head of Industrial & Logistics Research. “The Sydney and Melbourne markets are leading the country with respect to occupier activity and have recorded year-on-year rental growth of six per cent and four per cent, respectively, for super prime grade assets.

Sass J-Baleh
Sass J-Baleh, Head of Industrial & Logistics Research, CBRE.

“The significant growth comes as Australia’s e-commerce penetration rate hits a record 14 per cent. This mirrors US market conditions, which experienced strong rental growth for industrial and logistics assets when their e-commerce penetration rate reached 14 per cent.”

CBRE’s Industrial & Logistics Vacancy Report for the second half of 2021 highlights that 90 per cent of national occupier movements are due to tenant expansion and new space requirements – not simply due to relocation purposes.

Occupier activity in Melbourne remains the strongest in the country, representing 50 per cent of national total gross take-up over the past 12 months. Even though new supply in 2021 is just over double the long-term average (at 481,600 sqm), net absorption of space has been positive – totalling 860,000 sqm for 2H21 alone. As a result, vacancy across most Melbourne precincts has fallen.

Sydney’s strong occupier demand and limited supply of new developments has led to significant rental value uplift of 5.7 per cent over the past 12 months and lowering incentive levels (now averaging 13 per cent).

While below 2019 levels, Brisbane’s tenant demand over the past 12 months remains robust with around 560,000 sqm of positive net absorption recorded, with demand driven primarily by wholesale/retail trade occupiers, transport operators and manufacturers.

Sydney has the lowest vacancy rate in the country, falling by a full percentage point to 0.4 per cent, with net absorption over 2H21 remaining strong at around 548,000 sqm, while Perth recorded the largest decline in vacancy rates (-2.5 per cent) to 1.8 per cent – just above the national average.

The vacancy rates in Sydney, Brisbane and Perth are 0.4 per cent, 2.30 per cent and 1.80 per cent respectively, with Adelaide’s dropping just below 2.0 per cent – almost half that reported in 2H21. 

“Tightening vacancy has seen many occupiers fighting it out to secure the last remaining warehouses to secure their supply chains,” says Cameron Grier, Regional Director Industrial & Logistics Advisory and Transactions Services. “This competition has meant strong net effective rental growth for owners in the most tightly held submarkets, with many recent deals negotiated with no incentives. 12 months ago incentives in such buildings would have been 15-20 per cent.

Cameron Grier
Cameron Grier, Regional Director Industrial & Logistics Advisory and Transactions Services, CBRE.

“With occupiers looking to grow their omni-channel offering, we’ve seen a surge in enquiry outside the major markets. With retailers wanting to have both a geographic presence and the ability to control their own warehouses, vacancy fell in Queensland, South Australia, and dramatically in Western Australia during 2H21.

“The supply/demand equation means 2022 could be a great rental growth year for landlords that own assets in these tightly held markets.”

“E-commerce continues to be transformational across all Australian markets,” Sass J-Baleh adds. “While warehousing continues to have the biggest up-take of space, the retail sector has climbed to be the third highest industry sector driving demand for industrial space in Australia.



Vacancy: 0.4%

Net Absorption: 548,000 sqm

“The NSW leasing market has continued to tighten with sustained e-commerce demand, as well as retailers and 3PLs needing to accommodate buffer stock due to supply chain constraints,” says Michael O’Neill, Managing Director, Western Sydney, Advisory & Transaction Services – Industrial & Logistics. 

“Supply has been unable to keep pace with demand given a lack of speculative stock which was also delayed due to the most recent COVID lockdown. Insufficient speculative stock and an increasing rate of renewal has seen vacancy rates fall and will continue to decrease into 1H22. Some developers are also expecting further upward pressure on rents given the increasing costs of construction due to an insufficient supply of building materials. 

“Occupiers are committing to speculative stock sooner, and over 100ha of pre-lease stock in Kemps Creek region has now been committed to. Land rates have also strengthened in all markets by as much as five to six per cent within six months in some markets, primarily due to underlying leasing demand.

“Benchmark rates are being achieved in all precincts, and several recent transactions are likely to facilitate new multi-level sites in South Sydney, the Central West, and South West precincts.”


Vacancy: 1.3%

Net Absorption: 860,000 sqm

“Vacancy rates continued to fall, which resulted in some effective rental growth across all precincts, while most pronounced in the South East,” says James Jorgensen, State Director, Victoria, Advisory & Transaction Services – Industrial & Logistics. 

“There is a significant amount of speculative development supply due to be delivered across Victoria from 2H22, however occupier requirements continue to surge meaning we expect this speculative supply to be absorbed without impacting market rates. 

“A continuing market trend is the appetite of institutional investors who are now buying speculative developments, off the plan, via fund through structures with vacant possession.”


Vacancy: 1.64%

Net Absorption: 200,000 sqm

“The SA Industrial & Logistics market continues to push ahead with elevated demand from tenants, occupiers, developers, and investors,” says Jordan Kies, State Director, South Australia, Advisory & Transactions Services – Industrial & Logistics. “The SA statistics continue to show a decreasing vacancy rate and we therefore expect to see more speculative build activity throughout 2022, capitalising on the elevated levels of demand. 

“During 2021 we have seen the smaller infill unit developments come out of the ground and on the back of their successes, as well as the low vacancy, we are now expecting to see larger format warehouse developments come to fruition during 2022 and beyond.”


Vacancy: 1.80%

Net Absorption: 400,000 sqm

“Continued tenant demand has seen the Perth vacancy rate drop to a historical low of 1.8 per cent, resulting in an increase in rental rates for super prime and prime assets,” says Jarrad Grierson, State Director, Western Australia, Advisory & Transactions Services – Industrial & Logistics. “Tenants are being driven by continued confidence and activity in the state’s resource and mining sector, as well as demand from e-commerce tenants. Current pre-lease metrics are placing upward pressure on both pre-lease and existing market rents, with incentives continuing to tighten.”


Vacancy: 2.3%

Net Absorption: 560,000 sqm

“Leasing has been strong with take up of speculative developments continuing, seeing circa 326,000 sqm of take-up in 2021 YTD across the industrial leasing market,” says Peter Turnbull, State Director, Queensland, Advisory & Transactions Services – Industrial & Logistics. “Highlights would include Dexus at its Freeman Central estate, Capitaland at its Green Road, Crestmead development and GPT at Wembley Business Park estate. All these developments were leased close to practical completion.”

For more information on CBRE, click here. 


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