The Brisbane Northside industrial market has shown some good momentum over the last couple of years as demand has elevated for both primary and secondary stock, according to Ray White’s latest Between the Lines* report.
The research showed sales volumes had recorded a high rate in this time, albeit reduced given the lack of quality stock available to the market, which has caused yields to compress to record levels.
Demand for space by occupiers had also pushed rents up after a prolonged period of stability, also causing incentives to reduce.
Ray White Commercial QLD Director, Brokerage Services – Paul Anderson said across the Northside precinct, there were currently 33 industrial properties within the development pipeline, providing 162,480sq m of new industrial stock to the market.
“The bulk of this stock is strata projects, more so than larger distribution facilities,” Mr Anderson said.
“Currently there are six developments under construction which will add 36,000sq m of stock to the market by mid-2019.
“DA approved projects total close to 100,000sq m in floor area across 13 projects.
“Industrial land values have shown swift upward momentum over the past five years.
“Growth in investment by domestic and offshore groups has driven the demand for industrial land, coupled with the increased need for greater distribution and logistics assets and conversely smaller industrial unit developments for growing local business.
“The data in the report is correlating with what we’re seeing on the coal face. When you think about it, there’s so much infrastructure and mega construction happening over the next five years. It really is a positive story in Brisbane for the foreseeable future.”
Ray White Commercial QLD Senior Executive, Brokerage Services – Aaron Aleckson said industrial assets were highly sought-after by investors, institutions and owner occupiers alike.
“Both domestic and international funds are eagerly pursuing these assets due to their alignment with retail, and the need to store and transport goods on an ongoing basis,” Mr Aleckson said.
“As a result of this competition, in the over $10M price range of this asset class, we’re seeing flow-on interest into the smaller sub-$10M industrial market too.
“Increased competition of quality industrial stock has had a positive effect on investment yields across the Northside.
“While average yields may have remained stable over the past three years, the range in achievable yields have extended substantially.
“Since 2012, we’ve seen average yields compress by 120 basis points to 2016, averaging just below seven per cent within a range of five per cent to 8.5 per cent.
“Yields now range between four per cent to eight per cent depending on the age and condition of the asset, access and quality of the lease covenant, and WALE.”
Ray White Commercial QLD Senior Executive, Brokerage Services – Andrew Doyle said the industrial rental market had witnessed a resurgence since 2017.
“After a period of stability for some time, we’ve seen average net face rents grow at a rapid pace,” Mr Doyle said.
“As at March 2019, the average prime net face rent across the Northside is $143/sq m, up 11.51 per cent in the last year, after growing 5.76 per cent the prior year.
“Over the past five-years, average net face rents have grown at a rate of 6.79 per cent p.a.
“Considering the new leases signed across the Northside industrial market over the past 12 months, Ray White Commercial has analysed these tenants to understand the changing tenancy mix in the marketplace.
“Close to half of all leases (by area) were executed by transport and logistics users, which is in line with the growing trend for industrial space over the last five years.
“The uptake in e-commerce and need for storage and transportation has grown this need. The major factor on the rapid increase of land value is the supply and demand dynamics.
“There are only a handful of serviced small lots available between Pinkenba and Zillmere. Developers are seriously looking at sites with older buildings that can be demolished to ease this pressure. But that’s becoming harder to find.”