Brisbane, 10 June 2016 – The favourable interest rate environment and strengthening levels of investment demand could be set to drive further yield compression in Brisbane’s industrial market.
CBRE’s 2016 Q1 Industrial MarketView highlights improving conditions in Brisbane’s industrial market, with the decline in business investment tapering off and production levels forecast at 5.7% in 2016.
CBRE Senior Director, Queensland Industrial & Logistics, Ed Bull said Brisbane’s industrial sector continued to witness strong levels of transaction activity, which could give way to further yield compression.
“The sheer weight of capital looking to enter the market, coupled with the favourable interest rate environment, will fuel demand for core assets backed by secure, national covenants,” Mr Bull said.
“In light of this, we’re likely to see some yield compression for the right type of assets.”
Residential construction remains a strong driver of Brisbane’s industrial market, with dwelling approvals over the past 12 months growing by 15.6%, while container trade out of the Port of Brisbane also experienced 3.5% growth in 2015.
In the first three months of 2016, yields for super prime industrial assets in Brisbane remained at around 6.50%, while prime yields still sit at 7.43% and secondary yields at 8.73%.
The rental rates for Brisbane industrial property remained steady over the quarter, with super prime at $116 per square metre, prime at $114 per square metre and secondary at $93 per square mentre.
CBRE Senior Research Manager Kate Bailey said the supply pipeline would support continued value growth in the market.
“Following two years of significant new industrial supply, the pipeline for 2016 is considerably lower – reducing the risk of oversupply and supporting rental growth in the medium term,” Ms Bailey explained.
In Melbourne and Brisbane, a respective supply decrease of 55% and 11% is forecast, while in the undersupplied Sydney market, 765,000sqm is due for completion in 2016.
“This reduction in total supply entering the market is expected to encourage rent growth as demand begins to be supported by an improved industrial economy,” Ms Bailey added.
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