Industrial land values continue an upward trend due to demand for completed investments combined with a low yield environment which latest Knight Frank research says is encouraging investment in the development pipeline.
Institutional developers have moved to purchase the next wave, englobo sites as land absorption continues in Brisbane’s industrial market.
Knight Frank partner and joint head of industrial Queensland Chris Wright says stand out regions have been the south east (14.5 per cent and 20 per cent) and trade coast (23.5 per cent and 20 per cent).
“With established estates, particularly in the South, now almost exhausted, the major institutional investor/developer players have been actively sourcing the next wave,” Wright said.
“The next phase of development will likely be in the Yatala precinct, where activity has already picked up, while in the South West large scale land remains at Redbank, Bundamba, Swanbank and Willawong.”
The Knight Frank report found vacant space in
Brisbane’s industrial market had reduced by a further 2.5 per cent over the past year despite an increase of 15 per cent in the past quarter due to backfill space and spec starts. Vacancy remains 38 per cent below the peaks of early 2017.
The north, greater north and south east remain tight with limited availability. The research notes that the larger markets of TradeCoast, south and south west each saw increases of around 20,000sq m over the past quarter.
While tenant market activity has been fuelled by occupiers seeking to upgrade their accommodation, Knight Frank’s Mark Clifford says rental levels are recording modest growth.
“It’s a balancing act; while
land values have grown rapidly, rents have only just crept up a little.
large industrial land options becoming scarce, you would have to think that demand will eventually drive an increase in rents as the options for tenants dry up.” Brisbane industrial investment
Major sales, include three $100 million-plus sites this year. These include Blackstone divesting 111-137 Magnesium Drive at Crestmead for $182.50 million to
Charter Hall, DWS buying 99 Sandstone Place, Parkinson for $134.2 million from Frasers Logistics & Industrial Trust, and 81 Schneider Road in Eagle Farm to Charter Hall from QLD Treasury for $102.50 million.
This year transactions total $902 million to date, which the report notes is 88 per cent of the total achieved for the 2018 calendar year.
“While there are not a large number of investment opportunities on the open market, further sales are expected to see 2019 become a record year for industrial transactions,” Wright said.
“Unlisted funds have dominated purchasing activity over the past 12 months with 54 per cent of all transactions by value.”
Wright said offshore purchasers remain motivated to increase their exposure to the Brisbane market, but were still seeking the larger scale assets.
“Offshore buyers accounted for 32 per cent of total purchasing activity in the $5 million-plus category over the past year, but when you limit the analysis to purchases of $25 million or more, offshore buyers accounted for 51 per cent of the market.”