Brisbane Industrial Market - August 16

Sentiment - Subdued market, with less investor demand

Valuation - Lower activity, lower prices, no changes in yields

• Brisbane is the smallest industrial market on the east coast of Australia, driven mainly by distribution, construction and services, with a relatively small manufacturing base. Around 293,000 sq. m leased in 2015 (55% Southside), down 53% from 2014 activity.

• Market relatively quiet in 2015, with downturn in resources sector and tail-end of major infrastructure projects, coupled with weaker business confidence.

• Signs of positive leasing activity in early 2016, primarily in the transport, logistics and construction areas. Mainly leasing of existing industrial facilities under 5,000 sq. metres. Several new precommitments in 2016, for premises under 10,000 sq. metres (eg. Volvo Australia in Boundary Road, Wacol for 9,700 sq. metres).

• The Brisbane investment market remains far behind Melbourne and Sydney in investment activity and preference from the institutional and private market.

• The industrial market continues to mature as QLD state population base increases, generating economies of scale for the manufacturing and distribution sectors. Limited supply of new land near major roads may cause land prices to creep up in 2016.

• Supply of new industrial premises was limited to date, although the momentum is changing with developers responding to the ‘design and construct’ market, with larger companies seeking more efficiency and having industrial premises specifically built for their operational requirements. This has the potential to limit future rental growth, due to a competitive rental structure to attract quality tenants.

• Prime net rental rates range from $110 - $130 sq. metre for the Northside region, $110 - $150 sq. metre for the Tradecoast region and $105 - $130 for the Southside region.

• Investment yields generally range from 6.75% to 7.50% for prime industrial properties, whilst secondary properties are around 8.50% to 9.50%