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Industrial rents jump 30 per cent in Sydney

Record low vacancy rates have seen industrial rents jump 30 per cent across Sydney and more than 20 per cent in Melbourne over the past 12 months, according to commercial real estate firm Cushman & Wakefield.

Cushman & Wakefield’s joint Head of Industrial Sales & Leasing for Victoria, David Norman, said the industrial market is seeing incredibly tight levels of supply.

“Industrial rental markets are highly landlord favourable,” Mr Norman said.

“With extremely low vacancy and sustained demand, rents are growing at rates not seen in many years and faster than most markets across Asia Pacific.”

Rents for warehouse space in South Sydney between 5,000sq m and 10,000sq m are up 43 per cent to $270-300 per sq m. Rents have risen 49 per cent to $260-290 per sq m for larger logistics facilities in the precinct.

In Melbourne’s south-east, prime rents have risen almost 20 per cent to $130 per sq m over the past six months. Rents have also jumped 22 per cent in the west.

At the same time, incentive levels have been trending lower, averaging between 5 per cent and 15 per cent.

According to Cushman & Wakefield, Sydney now has the fastest-growing industrial rental market across the Asia Pacific, outpacing rental growth in 31 other tier 1 and tier 2 markets including Tokyo, Singapore and Hong Kong.

Commercial property specialist CBRE said the national industrial vacancy rate of 0.8 per cent is far lower than the worldwide average of 2.7 per cent, making Australia the tightest industrial rental market in the world.

Sydney’s vacancy rate is just 0.3 per cent.

CBRE said the record-tight vacancy rates are likely to remain at these levels for the foreseeable future, given that construction delays and rising costs have combined to reduce the supply pipeline of new industrial and logistics spaces across Australia’s five major capital cities.

They predict new supply will reach just 600,000sq m to 2.1 million sq m, which is nearly a quarter of the original forecast.