Take-up levels return to averages

• Gross take-up decreased by 39.5% q-o-q to 256,700 sqm. However, this was in line with the ten-year quarterly average and greater than the last two years’ first-quarter figures. The West precinct led quarterly leasing activity in Melbourne (64.2%).
• Demand was led by the Transport, Postal & Warehousing sector, accounting for 35.2% of the take-up.

Completion rates continue to remain significantly elevated

• New supply brought 362,700 sqm of warehouse space to the market, more than double the ten-year quarterly average. Of the supply, 52.8% was pre-committed at practical completion.
• The largest portion of quarterly supply was delivered in the West precinct (42.5%). The South East followed with 39.6%, the remaining 17.8% was in the North.

Rents, yields and incentives stabilise

• In Q1, rents across all grades and precincts remained relatively stable as we continued to see rising vacancy levels affect supply-demand dynamics. Incentives also remained stable in all precincts except the South East, which saw a small increase.
• Transaction volumes totalled AUD 463.6 million over the quarter. This total is 14% below the ten-year quarterly average.

Outlook: An unbalanced market in the short-term

• Significant incentive rates in the North and West precincts are making it feasible for occupiers to relocate into brand new buildings in the outer suburbs. We have seen examples of this and expect it to continue.
• Developers continue to delay speculative projects, awaiting pre-commitments due to high completion rates. While we anticipate a medium-term rebalancing of supply-demand dynamics due to this pause, we foresee limited rent growth in the near-term.