Brisbane’s industrial property sales reached $1.43 billion in 2017, which was up a record 54 per cent on the $928.1 million achieved in 2016.
According to Colliers International’s latest research, limited availability of stock and strong demand for industrial assets resulted in rising prices and tightening yields for prime grade product.
Colliers International national director industrial Matthew Frazer-Ryan said significant sales showing strong activity contributed to the record value in 2017.
“Key notable transactions in the latter half of 2017 included 920-928 Nudgee Road, Banyo for $36.75 million; and 741 Nudgee Road, Northgate for $28.25 million,” Frazer-Ryan said.
“There has been a 55 to 115 bps 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 bps. The Australia Trade Coast precinct recorded the tightest initial yield for prime grade industrial product sitting at 6-6.45 per cent.
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“A similar story has been experienced for industrial land values with prices rising considerably, due to limited supply over the last year.”
Year-on-year to March 2018, the average industrial land value across Brisbane increased around nine per cent. Land prices for industrial allotments of 2.5-hectares are the highest in the Australia Trade Coast precinct and range from $285-$425 per square metre.
Domestic buyers comprised approximately $1 billion (or 74 per cent) of sales. The share of offshore investment was lower in 2017 – due to the limited supply of suitable stock.
Related reading: Investment Appetite in Industrial Markets Remains Firm
Leasing deals
Frazer-Ryan said leasing activity for prime grade warehousing remained buoyant, whereas secondary grade stock remained relatively subdued.
One of the biggest deals of the year was by Sentinel Property Group for a waterfront bulk storage industrial facility on a 140,000 square metre site at 69 Tingira St, Pinkenba for a $48.5 million leaseback.
Colliers found there were nearly 490,000 square metres of leasing transactions during 2017. Of this, the majority were design and construct and/or pre-commitments. Prime grade rental rates remained relatively stable over the past year, and stagnant over the past quarter.
There was 251,000 square metres of industrial supply added to the industrial market in 2017, of which all have been leased. Additionally, of the 196,000 square metres anticipated for completion in 2018, 33,649 square metres is now complete and fully leased. A further 84 per cent of the 103,000 square metres currently under construction is leased.
Colliers International researcher Helen Swanson said in looking forward and assessing the short supply pipeline of upcoming projects over the next few years, she anticipated that incentives would continue to fall over the short- to medium-term.
“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 said.
