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Industrial Brisbane on investor lists following economic turnaround

Property Markets / Outlook

Australia / Brisbane

Sep 05 2018

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Major project completions in Queensland’s mining sector have helped stimulate economic progression, with growth in state final demand for the 12-month period rebounding above long-term averages, according to Savills Australia.

The company’s latest industrial report for Brisbane reveals that ongoing mining projects in Queensland are likely to see continued positive effects on the state’s economy, which coupled with the forecasted $46billion in infrastructure projects that are in the pipeline, will drive further demand for industrial space in Brisbane.

Associate director for Capital Strategy & Research, Shrabastee Mallik, noted that a positive spill-over effect into Brisbane’s industrial markets was imminent and would aid ongoing leasing demand and generate an increasingly positive business sentiment for the industrial sector.

“While the e-commerce sector in Australia is still in its infancy stages, there is growing evidence that Australians’ appetite for online retailing is rapidly increasing,” she said.

“Although Amazon’s entrance into the Australian market was underwhelming, the company has been increasing its footprint across the nation, as it sees the growth potential in the online retail space.”
Callum Stenson, state director for Industrial & Business Services in Queensland, said that he had observed an increase in investor enquiries about industrial warehouses for transport and logistics in response to growing recognition of Australia’s online retail market. 

“While sales activity in the current financial year was notably less than the records set in FY-16 and FY-17, we are going to see a comeback over the remainder of 2018, particularly from domestic investors who see the diversification benefits in investing across grades and precincts,” he said.

“There was a notable drop in offshore investors purchasing industrial assets as a lack of large prime-quality offerings were available for sale.”

Looking at leasing activity, Mr Stenson noted that “the 12 months to June 2018 saw tenants from the Transport & Logistics sector dominate overall leasing activity and account for more than half of the total space leased in Brisbane’s industrial market”.

“In this sense, Brisbane’s Trade Coast precinct is clearly benefitting,” he said. 

“With its close proximity to ports and major roads, investors are seeing the advantages of investing in this area, with investment yields the tightest of all Brisbane’s precincts at an average of 6.38 per cent.” 

Brisbane’s Southside and Trade Coast precincts recorded the largest falls in market yields in the year to June 2018.

“The Trade Coast precinct also recorded the highest capital value, growing 15.8 per cent throughout the past five years, with average prime capital values recorded at $1,925 per square metre,” Ms Mallik said.

“Growth in land values was even more prominent, with land values having grown by 48 per cent for the same period, in line with major infrastructure projects improving the connectivity of the precinct. 

“Average prime land values for 3,000sqm to 5,000sqm lots were valued at $475 per sqm, almost one and a half times more than land values in Brisbane’s Northside precinct.”

Looking forward, Ms Mallik said that infrastructure projects were providing the impetus for developers and institutional land owners to bring speculative development back to the forefront, recognising the recent lift in leasing demand, particularly in well-located locations close to major arterial roads. 

“While both leasing and sales activity were down in the most recent financial year compared to the previous year, it is expected that 2018 will continue the trend of strengthening tenant and buyer demand, as indicated by industrial job advertisement growth in Queensland, which is now the third highest nationally,” she said.

 

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