The Brisbane commercial and industrial market is performing strongly with rents increasing, land rates growing robustly and yields continuing to tighten. The rental market is being driven by occupier demand for modern and efficient buildings, and the investment market is driven by purchaser demand continuing to outweigh supply. Owner occupiers are active in the marketplace across all asset grades. Solid demand from all buyer profiles, historically low interest rates and minimal supply is driving solid growth.
The Australian Tradecoast industrial market is currently the best performing industrial market in Australia. Bolstered by multibillion dollar investment projects into the Brisbane Airport Precinct, major arterial upgrades, the inland rail and Port of Brisbane dedicated freight rail connection and multiple new large development projects, the Tradecoast has experienced the most significant growth in capital values and land values in the country.
Foreign investors, local investors, private syndicates and investment trusts are contesting for investments with quality covenants on long leases. The growth of selfmanaged superannuation fund buyers (up to $1m) is very strong, as well as owner occupiers (up to $3m). The influx of multiple buyer profiles is causing demand to outweigh supply and yields to compress, resulting in prices rising for tenanted investments, vacant buildings and development sites across all asset classes.
With interest rates at an historic low, many property owners are reluctant of selling unless they have sale proceeds allocated to other investments. Current bank returns are offering circa 2% hence the attraction to keep good quality investments between 5 - 8% net return. We are seeing a consistent trend in current tenants looking to become owner occupiers as in many cases it is more affordable to purchase than to continue leasing, capitalising on the low interest rates.
The Brisbane Industrial leasing market remains strong with high levels of leasing activity being experienced across all sizes. This has dropped the overall Brisbane industrial vacancy rate to 4.05%, the lowest vacancy over the past 5 years. We’ve seen this trend continue into the Tradecoast region with minimal stock becoming available for lease and quality stock attracting covenants quickly.