Brisbane industrial market records solid growth through flight to quality

A series of big space commitments by high-profile tenants has propelled the Brisbane industrial market to a solid performance in 2017, new Ray White Commercial data shows.

However, the flight-to-quality phenomenon has been at the expense of secondary-grade stock as some areas fall out of tenants’ favour, resulting in the decline of rents.

Dan Costello, Ray White Commercial Queensland Associate Director — Industrial Transactions, says close to 330,000sqm has been recorded in absorption across the larger-scale Brisbane industrial market during the 12 months to October 2017.

“The strength of demand-led completions and the take-up of existing stock is encouraging and has assisted in the downward movement in vacancies which have been historically high over the past few years,” Mr Costello says.

The Between the Lines Brisbane 5,000sqm+ Industrial Leasing market November 2017 report has found that large tenants have been drawn to purpose-built facilities particularly in the TradeCoast and Logan Motorway regions leaving large, empty premises across the Brisbane industrial market.

Key Trade Coast precinct leases this year include Chemist Warehouse (25,860sqm) and the Australian Federal Police (11,705sqm), with both deals secured in July 2017.

Ray White Commercial Head of Research Vanessa Rader says Logan Motorway and the Australian TradeCoast continue to be the locations of choice for tenants, with rents continuing their rebound and growing over the last year.

The South market continues to be out of favour by occupiers, resulting in prime rental reductions.

“The TradeCoast continues to be the premium industrial location in Brisbane particularly for larger logistical users given its proximity to the expanding airport and Port of Brisbane,” Ms Rader says.

However, many occupiers’ move to better tenancies has resulted in a growing divergence between prime and secondary stock, with rents showing drastic downward momentum for secondary-grade stock.

“Competition to secure tenants to existing and speculatively developed prime stock has been detrimental to the Brisbane Industrial secondary market,” Ms Rader says. “Poorer located assets will continue to see rental levels decline unless underlying demand levels pick up substantially.”

All regions have recorded significant downturn in secondary stock results over the past 10 years, and particularly in the past 12 months, but hardest hit has been the Southern precinct, currently averaging $70/sqm (down 4.11 per cent in the past year).

Logan Motorway’s average is $81/sqm (down 3.61 per cent) and the TradeCoast, being more resilient to these movements due to its prime location, has recorded an average secondary rent of $95/sqm (down 2.06 per cent).

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Photo: An aerial view of Brisbane over Brendale. (Ray White Commercial)