Brisbane industrial market booming with yields tightening: m3property

Brisbane industrial market booming with yields tightening: m3property
Brisbane industrial market booming with yields tightening: m3property

The Greater Brisbane industrial market has performed strongly over the last 12 months with prime rents increasing by more than 5%, land rates up by as much as 21%, and yields continuing to tighten, according to independent valuer and advisor m3property’s latest industrial report. 

The Winter 2019 report found supply constraints and strong owner-occupier and design and construct activity, especially in the e-commerce logistics area, had driven land (2000 square metre to 5000 square metre) rates across Greater Brisbane up by as much as 46% over the past three years. 

It found that investment sales, currently at circa $540 million for the first six months of the year, were well-placed to surpass what had been a big year in 2018 with circa $970 million of industrial assets transacted.  

Director of Research (Qld), Casey Robinson, said population growth, e-commerce and infrastructure projects had been key market drivers with the latter potentially playing an even more significant role as the State and Federal Governments sought to fast track some projects. 

“Brisbane’s industrial sector is experiencing boom like conditions and all indications are that the market will continue to perform strongly over the next 12 months as population growth and infrastructure projects drive even greater demand for new buildings,’’ Robinson said. 

“There were 1092 industrial buildings approved in Queensland in the year to May which is up 7.3% year on year. 

“Food manufacturers, transport/logistics operators and consumer product operators, in particular, will be behind a considerable increase in supply completions over the remainder of 2019 with most of it in the Western and M1 Corridors.’’

Robinson said an estimated 300,000 square metres of new supply was mostly pre-committed including new buildings for Coles (66,000 square metres), Australia Post (49,000 square metres) and Rheinmetall (42,000 square metres), all of which are located in the Western Corridor.

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Brisbane industrial market booming with yields tightening: m3property

Low yields here to stay 

Senior Valuer at m3property (Qld) Cameron Hicks said while purchaser demand continued to outweigh investment supply, downward pressure on yields would remain. 

“Demand for industrial assets has been very strong and with population growth and the mooted fast tracking of infrastructure projects, such as the strategically important inland freight rail project, continuing to drive tenant demand, the industrial investment market looks set to maintain its current trajectory,’’ Hicks said.

“That said, with the limited supply of modern buildings in the most sought after precincts, yields are likely to continue to tighten, but we should see some stabilisation towards the end of the year and into 2020.’’

He said the limited supply of land in those same precincts, especially the Australia TradeCoast both north and south of the Brisbane River, along with the trend to modern, efficient premises, would also drive further increases in land values.

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Brisbane industrial market booming with yields tightening: m3property

Hicks said while prime rents were expected to continue to rise, the extent of any rental growth would depend on the ability of tenants to absorb it. 

“Further real rental growth will be tested in cases where recent increases in taxable land values are passed onto tenants, and that seems likely in the majority of cases. This could negatively affect the potential for further real rental growth in the near term,’’ Hicks said. 

Hicks said the importance of the circa $10 billion Melbourne to Brisbane inland freight rail project had been underscored by recent acquisitions along the route including Garda Capital’s purchase of four properties - three of them adjoining the Acacia Ride rail yards - and a prominent Sydney based investor’s acquisition of two large properties also with rail access.  

“The inland freight rail project has already had an impact on the market and will undoubtedly continue to be a catalyst for growth with the potential to impact the entire Brisbane industrial market, especially if the line is extended beyond the Acacia Ridge terminal to the Port of Brisbane. Such an extension would result in improved connection to the Western Corridor and Toowoomba,’’ Hicks said.

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Brisbane Industrial Market

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