APPD Market Report Article


February 28, 2022


AUD 115


Pent-up occupier demand continues to be exercised in the market

  • Occupier demand, as measured by gross take-up (>3,000 sqm) totalled 140,700 sqm over 4Q21. This was stronger than the previous quarter (105,200 sqm) and above the 10-year quarterly average (120,900 sqm). Pent-up demand is being exercised in the Brisbane market as the effects of COVID-19 taper, and occupiers regain confidence in making leasing decisions, which is expected to continue into 2022.
  • In line with historical trends, 71% of gross take-up over the quarter was centred in the Southern Precinct. This was followed by the Trade Coast and Northern precincts which accounted for 24% and 5% of gross take-up respectively. Pre-lease commitments waned significantly from the previous quarter, making up only 5% of gross take-up, compared to 41% in the previous quarter.

Completions were more than double the 10-year quarterly average

  • Seven projects reached completion in Brisbane this quarter, totalling 162,800 sqm. The largest project to reach completion was the first stage of the Crestmead Logistics Estate, totalling 60,000 sqm. All of the completions recorded over the quarter were in the Southern precinct, and exceeded the historical quarterly average (72,700 sqm).
  • The Brisbane industrial supply pipeline remains significant with 337,481 sqm of plans under construction. Of this, 44% is expected to complete across 1H22, with the remainder completing thereafter. Additionally, there is 465,799 sqm of plans approved stock currently in the supply pipeline, of which 42% is expected to complete in 2022.

Net rental growth increased in line with demand

  • Prime net rents grew moderately in the Southern (1.8%) and Northern (1.6%) precinct over the quarter. The Trade Coast precinct recorded slight increases in both prime (0.8%) and secondary rents (1.0%), as previous market strength tapers growth in the near term. Prime (17.5%) and secondary (9.2%) incentives decreased 0.5% and 4.2%, respectively.
  • The prime yield range compressed on the upper end over the quarter to 4.0%, while the lower end remained unchanged at 5.25%. The mid-point of this range (4.67%) is the tightest mid-point recorded in the Brisbane industrial market. The secondary yield range tightened on the lower end by 25 bps, to a range of 5.50%-7.25%.

Outlook: Large supply pipeline expected to absorb demand

  • Demand is expected to remain considerable over 2022, as transport/logistics, manufacturing, and food retailing drive take-up across the Brisbane market. The supply pipeline in Brisbane is to remain substantial in 2022, and is expected to absorb much of the demand being exercised across the Brisbane market. As such, it is unlikely that elevated demand will directly affect rental growth.
  • Near-term effects of the outbreak of the Omicron variant of COVID-19 are expected to impact demand and investment levels in the Brisbane market across 1H22. Companies once again are expected to refrain from making leasing and investment decisions due to uncertainty. As with earlier outbreaks, we expect this pent-up demand to be exercised at a later time rather than dismissed entirely.

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

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