Tight Vacancy Rates Across The Industrial Sector Driving Rents

Rents across the industrial sector continue to drift higher, driven by ongoing demand and tight vacancy rates, according to new research.

Dexus Research found that the industrial sector has continued to hold strong, despite higher interest rates. The report uncovered record low vacancy rates across the industrial market continues to lead to significant rent growth, which will mitigate valuation risks.

“While capital values have eased, key industrial markets have now achieved between 20-30 per cent growth in rents over the past 9 months which has been vital for preserving valuations,” the report said.

“Land values in Outer West Sydney and West Melbourne declined 10 per cent, with inner markets proving more resilient.”

The report found that tight vacancy rates and a strong rental growth outlook continue to attract capital to the Australian industrial market.

“Investors are becoming more selective in their choice of product due to tightening capital markets,” the report said.

“Transaction volumes eased over the quarter with around $1 billion of investment recorded in the industrial sector.

“Short WALE and value-add opportunities were more keenly sought after, as a means of capturing short-term rent growth.

“Foreign-backed capital remained strong with acquisitions significantly outweighing disposals.”