APPD Market Report Article
BrisbaneSeptember 4, 2023
Annabel McFarlane, Head of Strategic Research, Australia
Demand contracts to historical average levels amid low vacancy
- Gross take-up in the Brisbane industrial market contracted below the 10-year historical average (129,070 sqm) in the quarter, totalling 126,090 sqm, a figure 16% below the total in the previous quarter.
- The Retail Trade sector accounted for the largest portion of gross take-up in the quarter, comprising 22.7% (28,650 sqm), followed closely by the Transport, Postal & Warehousing sector, which took up 22% (27,720 sqm).
New stock delivery remains elevated despite high development costs
- Despite declining 16% relative to the total in the previous quarter, new stock delivery remained well above the 10-year historical average (76,120 sqm), totalling 121,030 sqm in the quarter. Existing structural tailwinds and easing development costs are likely to support construction going forward.
- JLL is currently tracking about 498,700 sqm of stock under construction in the Brisbane industrial market, 49% of which has already been pre-committed to. New supply over the next six months will be heavily weighted towards the Southern precinct (68%).
Rents temper as investment activity slows
- Sustained low vacancy has continued to place upward pressure on rents in the quarter. The Northern precinct exhibited the most significant growth, expanding by 1.2% q-o-q, while the Trade Coast grew by 0.8% q-o-q. The secondary market outpaced the prime market for the Northern precinct, growing by 3.6%.
- Transaction volumes declined by 24% in the quarter, totalling AUD 114.25 million. This is less than half of the 10-year quarterly average (AUD 281.7 million). Despite this, the rolling 12 month total remains above the 10-year quarterly average (AUD 1,126.9 million), totalling AUD 1,197.2 million.
Outlook: Conditions to remain robust amid economic headwinds
- Despite prevailing economic headwinds, demand prospects in the Brisbane industrial market remain strong, as low vacancy and low gross occupancy costs relative to the Sydney industrial market are likely to drive demand going forward.
- Inflated construction costs and labour shortages are likely to cause continued delays in the development pipeline, although easing supply chain constraints should provide a degree of relief. Much of the supply pipeline remains in the Southern precinct, due to greater land availability.