New industrial developments slated for Brisbane will underpin growth in the city’s industrial property market, according to new research by
The 2014 Industrial MarketView Q2 report predicts strong commitment from the Federal and State Governments to undertake major infrastructure projects in the Queensland capital will provide a strong base growth for the surrounding industrial market.
CBRE Research Manager Mark Lafferty said the scheduling of several new projects would provide a welcome boost of confidence to the sector.
“While there is some uncertainty around the funding for some projects, the strategic direction and priority appear to be clear,” Mr Lafferty said.
“As a result, the surrounding industrial markets are positioned to benefit from a lift in investor sentiment levels, as well as stronger demand for industrial space.”
Major projects earmarked for Queensland include the multibillion-dollar Toowoomba Second Range Crossing – a 41 kilometre bypass running from the Warrego Highway to the Gore Highway via Charlton.
By the end of 2014, 475,000 square metres of new supply over 5,000 square metres is forecast to be added to Brisbane’s industrial market.
Mr Lafferty said firming confidence levels and improved business conditions was supporting the large supply pipeline.
“Speculative development activity in Brisbane has increased to its highest level since 2008, signalling a shortage of prime warehouse space,” Mr Lafferty said.
“It currently represents more than 100,00 square metres of the 2014 development pipeline.”
Mr Lafferty said tenant demand for prime warehouse and distribution centres was strong, however, rental growth was constrained due to competition between landlords.
The report shows an uplift in sales activity during the first half of 2014, with $180 million in industrial property changing hands during the period, representing a 16 per cent increase on the corresponding period last year.
CBRE Director Queensland Industrial Group Edward Bull said investor appetite for well-placed prime assets was strong.
“Although prime assets are in high demand, investors are increasingly looking to the secondary market for value add opportunities due to the limited availability of investment grade properties for sale,” Mr Bull said.
“Of the 14 investment grade properties that have sold off market during the quarter, 10 were transacted off market – further demonstrating the strong investor appetite for industrial real estate.”
The report shows the investment value of super prime, well-let properties with a long term lease are selling at yields as low as 7.25 per cent, compared with a secondary facility with a slightly weaker tenant and shorter-lease term selling at an indicative 9 per cent.