Logistics accounts for over a third of Australia’s overall leasing take-up

Around 450,000 sqm of logistics space was absorbed in Q3 2021 alone.

Australia’s industrial property market remained an outperformer in the second half of 2021. According to Dexus Research, approximately 450,000 square metres of logistics space was absorbed nationally, driven by the lockdowns in Sydney and Melbourne.

“Online sales surged ahead to record 31% growth over the quarter. The logistics sector remains the biggest category in terms of leasing, accounting for approximately 35% of national take-up in the year to date,” the analyst adds.

Here’s more from Dexus Research:

Competition by companies seeking to lease prime, well-located assets, combined with record low vacancy, continued to drive rents. The West Melbourne market surged with rents growing by 6.8% over the September quarter for a gain of 11.8% in the past year. Outer West Sydney experienced a robust 2.2% in the quarter for an annual gain of 4.8%. Sydney’s inner markets also saw strong growth. 

After languishing for several years, Perth is beginning to follow the trends evident on the east coast, with East Perth recording its second consecutive quarter of rent growth (4.1%) taking the year-on-year growth to a staggering 8.5%. Rents remain at a 23% discount from the peaks of 2012, reflecting significant upside. 

Investment demand remains very strong. Domestic appetite from major players to purchase and develop products appears to be pricing out smaller players. Over the past quarter, average prime yields have significantly compressed in Outer West Sydney and West Melbourne to well below 4%, on the back of circa $900 million worth of investment in both markets. With improving leasing fundamentals, Perth has appeared on the radar of many players looking for an attractive yield play. 

Large investments by Dexus/Dexus Industria REIT at Jandakot Airport and Charter Hall in the north have tightened the yield spread between the Perth and Brisbane market to c25 basis points. 

Land values continue to benefit from a combination of the weight of capital by developers and diminishing supply of large sites. The Outer West Sydney market has hit $1,000/sqm (2-5 ha), while West Melbourne boasted the strongest growth of all markets adding a further $125/sqm onto its price tag to $500/sqm (2- 5ha), a gain of 67% over the year.