Logistics & Industrial Occupier Market Outlook 2024

Vacancy Rate Impacts Ordinarily, supply of this magnitude would trigger a material rise in vacancy rates, similar to what is occurring in the US and across Europe. However, almost 60% of the 2024 pipeline is already committed meaning only modest impacts from new supply on vacancy rates. While not all of these commitments are tenant expansions, which will trigger secondary backfill leasing space, current enquiry on the East Coast is in the order of 2.0 million sqm. Structural tailwinds and significant planning delays in select cities will act as a ceiling on how high vacancy rates can go. Our base case scenario is for the national L&I vacancy rate to move to 2.9% by the end of 2024 and 3.9% by mid 2025, up from its current 2.0%. Even at these vacancy levels, it remains well below the market equilibrium of 5.0%.

By city, Adelaide is forecast to have the lowest vacancy over the next 12 months given the subdued supply pipeline, reaching 2.8% by mid 2025, while Sydney and Melbourne are expected to rise to 3.8% and 4.2% respectively over the same period. Brisbane (4.3%) and Perth (4.5%) are anticipated to move higher given the lower commitments for the supply that will enter the market, albeit vacancy is expected to be concentrated in select submarkets. With an above average supply response, our view is that we will begin to see greater bifurcation in the market by building grade. The catalyst behind this stems from a continued focus from occupiers on efficiency and more choice for occupiers. Similarly, vacancy rates will be skewed by big box facilities, while leasing options under 15,000 sqm are expected to remain tight.

Figure 14. Capital City Vacancy Rates (>3,000 sqm)

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

2013 2014 2015 2016 2017 2018 2019 2020 2021

2022 2023 2024

Sydney

Melbourne

Brisbane

Perth

Adelaide

Source: Cushman & Wakefield

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