Economic upturn drives growth in Brisbane industrial market

Brisbane, 12 February 2016 – An uplift in Queensland’s economy in 2016 will underpin growth in the state’s industrial and logistics sector, a new CBRE report shows.

CBRE’s 2015 Q4 Industrial MarketView highlights a recovery emerging in Brisbane’s economy in 2016, with the low Australian dollar helping boost industrial production to 6.4%.

CBRE Director, Industrial & Logistics, Ed Bull said while conditions remained relatively flat across the Brisbane market, there would be pockets of growth.

“There has been a marked increase in larger tenant enquiry across Brisbane for 10,000sqm or greater,” Mr Bull said.

“The increase in demand will help support the fundamentals and underpin the tightening of prime yields in the capital markets.”  

The report shows container trade out of the port of Brisbane experienced 3.7% growth in the 12 months to October 2015, fuelling demand for transport and logistics assets.

Approximately 120,000sqm of new industrial stock was completed in Q4, bringing total supply for 2015 to 274,000sqm – approximately 20% lower than 2014. The supply pipeline for 2016 is expected to rise to 306,000sqm.

On the rental front, industrial rents remained steady across Brisbane, however, the strong supply pipeline is limiting the potential for any rental growth in the sector in the immediate to medium term.

Mr Bull said investors continued to seek super prime investments that had sound fundamentals of lease security and tenure.

“Offshore capital has recently made a push into the Brisbane market and we see this continuing for the right product in the medium term. We see the differential between prime and secondary yields closing from approximately 200- 250 basis points currently to around 150 basis points as investors locally, and to some extent offshore groups, look to take on some leasing risk.”

The low Australian dollar supported industrial markets nationally in 2015, with foreign buyers more than tripling their presence in the market, accounting for 37% of all sales during the year.

Foreign buyers made a strong push for industrial assets during the 12 month period, with 37% of all sales in 2015 to foreign buyers compared with only 10% in 2014.

CBRE's Senior Managing Director, Industrial & Logistics - Pacific, Matt Haddon said Australia’s industrial market would continue to hit the radar of an increasing pool of investors in 2016, off the back of the favourable economic climate.

“Australia will continue to be a sought after market on the global stage, with the lower dollar and higher comparative yields on offer making it an increasingly attractive investment destination,” Mr Haddon said.

“We expect foreign interest in industrial and logistics assets to continue strengthening in 2016, with prime assets backed by secure covenants in core locations across the country, to be in most demand.”