Vacancy & rents
Brisbane’s southside industrial market has seen one of the strongest Q1 starts to the year since the GFC more than 10 years ago with Queensland’s merchandise exports reaching new records and driving a large portion of demand for industrial space. Logistics companies have also been a driving force for demand with proximity to both local roads and long haul arterials becoming of increasing importance. We have seen a welcome surge of fresh tenant demand entering the market over the last 6 months. This steady demand coupled with low new supply completions over 2018 has led to a take up of around 14% of vacant space over the last 12 months and vacancy levels now below the long term average for the first time in 5 years. This has not yet led to any noticeable growth in rental rates, with the exception of premium grade buildings. Rental rates are expected to remain stable over 2019 and 2020 as more than double the previous year’s supply completions are expected to hit the market this year.
Industrial land values are showing continued growth as take up of land remains high and we move into shortage territory across metropolitan Brisbane. Average year on year growth is around 6% with some areas experiencing far greater growth rates.
Investment activity & yields
2018 saw a record year for investment transactions and turnover with a steady increase in appetite from both local and international investors. Interstate investors are continuing to turn their attention to Brisbane off the back of cooling property markets in other major cities across Australia, whilst offshore investors who have long sought to increase their exposure in Brisbane continue to test new yield lows on prime grade properties with long WALEs. Last year was expected to see a reversal in the sustained year on year yield compression we have seen since 2013, however yields have still yet to peak as we enter 2019 at 6.5% and 7.5% averages for A and B grade assets respectively, with some transactions as low as 5.7%.
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