APPD Market Report Article

Brisbane

November 28, 2022

Annabel McFarlane, Senior Director - Research, Australia

7.0%

AUD 121

Rents
Rising

Occupier demand remains strong across the market

  • Occupier demand, as measured by gross take-up (>3,000 sqm), has remained strong in the market (about 97,200 sqm) over 3Q22, despite reporting below the 10-year quarterly average (about 122,600 sqm). Strong company profits are allowing for occupier expansion, which has contributed to gross take-up over the quarter.
  • Demand was heavily concentrated in the Southern Precinct, comprising 67% of gross take-up. The remaining 41% and 8% occurred in the Trade Coast and Northern Precincts respectively.

Six projects reach completion over the quarter

  • Several projects reached completion over the quarter, delivering about 82,300 sqm of industrial space to the market. Four of the six projects were pre-committed upon completion. 94% of this industrial space is situated in the Southern Precinct, with the remaining 6% being situated in the Northern Precinct.
  • The supply pipeline remains strong as a large amount of space is anticipated to reach practical completion next quarter, totalling around 205,600 sqm. About 67,200 sqm of that has already been pre-committed. The remaining 9 of the 27 projects currently under construction are anticipated to complete in 2023, and set to deliver about 206,600 sqm to the market.

Transaction volumes remain substantial

  • Prime net rents continue to grow across all precincts, increasing by 1.6% in the Southern Precinct, 4.0% in the Northern Precinct and 3.2% in the Trade Coast over 3Q22. Strong demand and limited available stock continue to be the drivers of this growth in rents. The Northern Precinct has recorded the strongest annual growth (17.3%) compared to the other precincts.
  • After several years of tightening in the industrial market, average prime yields have begun to soften across industrial precincts. The prime mid-point for both Northern and Trade Coast yields softened by 25 bps, reaching 4.88%. The Southern Precinct recorded a stronger softening of 38 bps to reach the same average mid-point yield of 4.88%. Secondary yields remained unchanged across precincts.

Outlook: Investors likely to remain cautious in coming quarters

  • Slowing investor demand for primary assets is what has already instigated yield softening across the market in 3Q22. Therefore, despite the strong volume of sales over the quarter, the market is anticipated to slow in the near term as the depth of willing buyers shrinks and rising cost of debt begins to take hold.
  • Occupier demand is expected to remain elevated for as long as company profits remain strong. However, with the e-commerce industry being a strong driver of the industrial sector, the anticipated slowdown in consumers’ discretionary spending may affect occupier growth in the industrial sector going forward.

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

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