Brisbane industrial enjoys 50% boom

Industrial property sales have hit a record high in Brisbane totalling $1.43 billion in 2017 – a rise of more than 50%.

Limited stock as well as strong interest fuelled the growth with transactions shooting up from the $928.1 million in 2016.

Colliers International’s latest research for the first half of 2018 revealed the boom along with tightening yields for prime grade product.

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Domestic buyers led the market backing 74% of the sales worth about $1 billion.

Offshore investment was lower during 2017 due to the limited supply of suitable stock.

Colliers International National Director – Industrial, Matthew Frazer-Ryan, says several significant sales contributed to the upward trend.

“Key notable transactions in the latter half of 2017 included 920-928 Nudgee Rd, Banyo for $36.75 million; and 741 Nudgee Rd, Northgate for $28.25 million,” he says.

“There has been a 55 to 115 basis point cap rate compression of prime grade initial yields for Brisbane industrial assets over the period Q4 2015 to Q1 2018.

“The greatest level of compression over the respective period was experienced in Brisbane’s northern industrial precinct, with yields tightening by 110-115 basis points.

The Trade Coast is showing strong growth.

“The Australia Trade Coast (ATC) precinct recorded the tightest initial yield for prime grade industrial product sitting at 6% to 6.45%.”

It was a similar story for industrial land values, with an average 9% year-on-year increase as of March 2018.

Land prices for industrial allotments of 2.5ha were the highest in the ATC, ranging from $285-$425 per square metre.

Leasing activity for prime grade warehousing remained buoyant, however interest in secondary grade stock has been subdued, according to Frazer-Ryan.

Overall there were almost 490,000sqm of leasing transactions during 2017.

The greatest level of compression over the respective period was experienced in Brisbane’s northern industrial precinct, with yields tightening by 110-115 basis points

One of the biggest deals was for a waterfront bulk storage industrial facility on a 140,000 sqm site at 69 Tingira St, Pinkenba for a $48.5 million on a leaseback arrangement.

Prime grade rental rates remained relatively stable over the past year and were stagnant over the past quarter.

The ATC again led the industry average at a net face of $116 per sqm.

There was 251,000sqm of industrial supply added to the industrial market in 2017, of which all has been leased.

Additionally, of the 196,000sqm tipped for completion this year, 33,649sqm is now complete and fully leased.

A further 84% of the 103,000sqm currently under construction is also leased.

Colliers International researcher Helen Swanson is tipping incentives will continue to fall over the short to medium-term with a short supply pipeline of upcoming projects in the next few years.

“The Queensland economy is benefiting from improved employment and net interstate migration numbers, along with a strengthening service and residential construction sector, which overall are having a positive impact on business sentiment and hence demand for industrial assets,” Swanson says.