Sydney ranks as the world’s tenth most expensive city for industrial leasing, in competition with severely land-constrained locations such as Hong Kong and greater Tokyo.
Melbourne, meanwhile, might be the world’s most liveable village but it also ranks as the 12th strongest city globally, with prime rents increasing by 5.5 per cent for the year to March 2018.
According to CBRE’s annual review of global and industrial prime rents, Adelaide also featured strongly with rent increases of 5.1 per cent, the 17th strongest of the 71 cities surveyed.
The firm says prime rents in the Asia Pacific (APAC) region averaged 2.2 per cent over the period, a sharp uptick on the previous 1.4 per cent growth.
“Construction of new facilities has been constrained in APAC, as new supply currently under construction and forecast for delivery in 2020 will either equal or fall below the historic five-year average.”
The APAC data shows Melbourne’s rent rises as second only to Beijing. Rents galloped 19.8 per cent in the Chinese capital, the result of central government policy restricting land use and limiting smaller warehouses without adequate security.
CBRE associate director Kate Bailey said Melbourne was benefiting from the highest capital city population growth, as well as infrastructure projects such as the Metro Tunnel and the Westgate Tunnel.
“But the real resurgence lies in manufacturing, especially food processing and high-tech. Ecommerce is much stronger in Melbourne and Sydney than elsewhere.”
In Adelaide, an anomalous market because of its small size, rents have benefited from the lack of new supply of 5000 square metres or more.
Still at $US6.02 ($8.10) per square foot ($87 per square metre), Melbourne’s lease costs remain well below Sydney’s $US9.61 square feet (up 3 per cent).
Hong Kong retains its status as the world’s most expensive place to operate, with rents of $US30.99 square feet. London ($US22.35 square feet) and greater Tokyo ($US19.96 square feet) are the second and third costliest locations.
Globally, the Canadian city of Vancouver led rental growth with a 29.1 per cent increase for the year (to $US7.56 square feet).
According to CBRE, e-commerce will remain a key driver of demand. “Consumer requirements for speedy service have forced everyone in the retail supply chain – manufacturers, supplies, distribution and retail – to carry more inventory in more locations,” the firm says.
“Last minute delivery has been a key focus, generating greater requirements for urban logistics space such as milt-storey locations in densely populated areas.”
Despite the narrative of strong global growth – the International Monetary Fund estimates global GDP growth of 3.8 per cent in 2017, the strongest since 2011 – Perth and Brisbane bucked the trend with declines of 0.2 per cent and 7.8 per cent respectively.
Perth was suffering the hangover of the commodities collapse, but rents had stabilised in the last six months. “We are seeing some green shoots in that economy,” Ms Bailey said.
In Canberra – a town more known for stationery cabinets than shipping containers – industrial rents were steady at an average $US7.78 square feet.