East coast industrial vacancy surges to near three year high: Knight Frank

Total industrial vacancy on Australia's eastern seaboard surged to a near three year high in the 12 months to January, as the Melbourne and Brisbane markets were swamped with additional space.

Fresh figures from Knight Frank's Quarterly Eastern Seaboard Industrial Vacancy report showed that the total industrial vacancy on the east coast rose 2% over past quarter and 10% in the past six months to 1.84 million square metres as at January 2014, reflecting a 28% increase over the same time last year.


Source Knight Frank

Inflating that result was a jump in available industrial space in Melbourne, which was up 26% to 626,848 square metres over the past six months - the highest vacancy in more than three years.

The vacancy rate in Brisbane soared 17% to 551,433 square metres - the highest recorded by the survey, which started in early 2007.

Taking a 12 month perspective, the vacancy rate was more pronounce in Melbourne and Brisbane - up 75% and 67%, respectively.

Sydney was the bright spot in the results, with the vacancy rate falling 7% to 662,661 square metres, down 7% over a six month period and 12% over the year.

Prime space across the Australian east coast market remained relatively scarcer than secondary, however the proportion of prime space had increased marginally over the past year, from 34% to 44% of the market, said Knight Frank's head of research and consulting Matt Whitby.

The highest proportion of available prime space is within the Sydney market with 49%, equal to 322,350 square metres of total available stock.

"The proportion of total vacancies made up of prime stock is now at its highest level since the series began although the majority of these options are in the sub 10,000 square metres range," Whitby said.

Better placed was the secondary market, which has fallen 40% since its peak down to 340,300 square metres.

“This is expected to correct sharply over the coming quarter with a strong pipeline of 35,000 square metres of vacant stock in Sydney currently under offer, 20,000 square metres of which is speculative builds,” said Whitby.

"This is another sign that confidence is returning, particularly within the Sydney market, as much of 2013 was dominated by shorter term leases in secondary accommodation as a hold over measure until corporate confidence improved and longer term, higher grade accommodation is sought.”

Commenting on the tenant demand, Knight Frank national industrial director, Greg Russell, said that the take-up across the eastern seaboard had softened for the second quarter in a row, following the July 2013 quarter record result, with 34 buildings over 228,493 square metres absorbed.

“There is some scope for leasing demand to pick up, as enquiry levels suggest a degree of improvement, however there remains a lack of urgency from tenants to finalise premises related decisions,” Russell added.

The Knight Frank research also pointed to the firmer tenant demand for prime grade stock, with 78% of gross absorption in the second half of 2013 dominated by prime accommodation. The take-up of secondary accommodation over the past quarter - some 49,400 square metres - is significantly less than the 273,800 square metres absorbed in the July 2013 quarter.


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