Industrial vacancy rates across Brisbane have edge lower for the second consecutive quarter helped by a reduction in sublease space

INDUSTRIAL vacancy rates across Brisbane have fallen for the second consecutive quarter.

Generic photos of materials stored at Lindcraft's Blackburn warehouse in Melbourne.

INDUSTRIAL vacancy rates across Brisbane have fallen for the second consecutive quarter.

Knight Frank’s latest Brisbane Industrial Vacancy Research found the level of available space dropped 11,818sq m, or 1.8 per cent, over the past quarter to sit at 640,996sq m.

Knight Frank’s Head of Industrial, Australia Greg Russell said despite vacancy remaining above average, total vacancy was beginning to respond to a lull in backfill space and a reduction in new sublease space.

“Take-up of vacant industrial space was strong over the majority of 2015, following a slow start in the first quarter of the year. Inquiry levels have remained patchy, with solid periods of inquiry followed by quieter times in the market,” he said.

“Demand has continued to arise from transport and 3PL users, as well as those companies related to the building industry.”

According to the report, which monitors available space 3000sq m plus, the level of prime space fell by 8.8 per cent over the quarter to 313,511sq m. However, available secondary space rose by six per cent to 327,485sq m.

Mr Russell said available space was dominated by warehouse-style buildings, making up 81 per cent of the total.

“In line with the reduced expenditure in the resource sector, manufacturing and metal fabrication demand has remained subdued. This has impacted demand for vacant space,” he said.

“Manufacturing stock has a current time on the market of 20.2 months, in comparison with warehouse stock, which averages 13.5 months.”

Knight Frank’s senior director, Research, Queensland, Jennelle Wilson said in final quarter of 2015 vacancy in the TradeCoast precinct was down 18 per cent; Greater North fell 18.9 per cent and South West plunged 21.5 per cent.

“The other three precincts balanced out these figures, recording increases with the North up 8.9 per cent; South up 18 per cent and South East up by 12.8 per cent — meaning that the overall reduction in vacancy was only modest,” she said.

Ms Wilson said the forecast new supply for 2016 appears to be in line with that of 2015, with a number of the “proposed” projects to potentially be deferred into next year.

“Investment market conditions have remained solid for prime assets, with yields sub-seven per cent for modern, long weighted average lease expiry opportunities. Although, yields for assets with exposure to vacancy have appeared to plateau,” she said.

“These high prices achievable for new, long-leased assets has continued to spur both speculative development and low precommitment rents, which will create further backfill space — although not at the pace that was seen in early 2015.

“While the vacancy appears to be trending down and take-up has remained strong, the market rents remain soft.”