APPD Market Report Article

Brisbane

December 1, 2021

3.1%

AUD 113.4

Rents
Rising

Occupier demand was slightly below the 10-year quarterly average

  • Occupier demand, as measured by gross take-up (>3,000 sqm), was slightly below the 10-year quarterly average, totalling 105,200 sqm. Previous quarters in 2021 have demonstrated large amounts of pent-up tenant demand being exercised in the Brisbane market, as COVID-19 effects tapered. While demand has eased slightly, the strong industrial theme will continue to prevail in 4Q21 and into 2022.
  • Demand was heavily centred in the Southern precinct, accounting for 75% of gross take-up. The Trade Coast and Northern precincts made up the remaining 22% and 3% of occupier activity respectively. Pre-lease commitments accounted for 39% of take-up over the quarter, as developers seek to secure tenants before construction of new prime grade facilities are commenced.

The supply pipeline remains substantial

  • Two projects reached completion in Brisbane in the quarter, totalling 28,500 sqm. One project, totalling 9,300 sqm, was fully committed in the Northern precinct, with the other completing in the South. Completions have remained low throughout 2021, with no quarter surpassing the 10-year quarterly average.
  • While completions were weak over the quarter, the supply pipeline remains significant. There are currently 17 projects under construction, totalling 396,600 sqm. Of this, 34% is expected to complete in 4Q21, with the remaining 63% expected to complete over the duration of 2022. Additionally, 903,700 sqm of plans approved stock is currently in the pipeline, with 44% expected to complete in 2022.

Price growth is supported by investor and occupier demand

  • Prime net rents grew moderately in the Southern precinct (1.6%) and Trade Coast (1.8%) over the quarter. The Northern precinct recorded significant increase in both prime (3.4%) and secondary (7.3%) rents, because of relatively small growth in previous quarters despite market strength. Prime incentives (18%) decreased 2.0% over the quarter, while secondary incentives (12.5%) remained stable.
  • Yields have again compressed over the quarter, a signal of continued investor demand and capital flow. The prime yield range tightened by 25 bps on the upper and lower end, bringing the range to 4.25%-5.25%. The mid-point of this range (4.75%) is the tightest mid-point recorded in the Brisbane industrial market. The secondary yield range also tightened at both ends to a range of 5.25%-5.50%.

Outlook: Market strength is expected to continue into 2022

  • Demand is expected to remain substantial over the near term, as transport/logistics, manufacturing and food retailing drive take-up across Brisbane. Structural trends have increased enquiry from existing 3PL providers, as well as new entrants as they re-organise supply chain operations due to domestic and international border closure.
  • Strategic acquisitions are expected to continue into the second half of 2021, as capital in search of yield persists. Diversified companies and funds are expected to reweight portfolios toward the industrial sector, supporting growth and allowing business that traditionally held capital in property ownership to recycle funds.

Note: Brisbane Logistics & Industrial refers to Brisbane's industrial market (all grades).

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