Brisbane Commercial and Industrial Market Update – March 2020

February 24, 2020

Supply and Demand
We see State government investment in infrastructure remain a bastion for industrial growth. Demand for logistics and supply chain properties (ecommerce) is continuing to be a driving force, offsetting drops in activity in other sectors. Overall, state final demand for Queensland has improved by 1.3% y-o-y. Queensland has also experienced an influx of industrial supply, increasing a sizeable 245% in 2019. Development approvals have also been stirring, with 1.2 million square meters approved over the next three years, indicating strong supply over the coming years. Together, this has created a pickup of sales in Q4 2019, up over 40% compared to the final quarter in 2018.

Rent and Yield
Despite increased activity in the leasing market, the influx of supply has put downward pressure on rent growth, with rent values remaining relatively flat. Coupled with a decline in bond rates, yields are predicted to compress an average of 25 basis points. This has been reflected in steady prime yields
of 5.50% in 2019.

Land Values
Industrial land values have remained steady over the short term, with a continuing long-term growth in value. Industrial investors have acquired key industrial sites, noting a limited supply of prime locations.Investment growth has been especially strong in the Brisbane’s M1/Logan Motorway Corridor precinct, with much of this growth funded by foreign investment. The common theme for demand is properties with logistics and supply-chain attributes, which have become more highly valued.

Simultaneous large increases in new supply and demand activity and lean yield rates typify this previous and coming year’s outlook. Property investment and development for eCommerce logistics is one to watch out for, with it gaining significant traction in the market over the past year.

Phil Levesque & John Andrew
FAL Property Group