Spotlight on Brisbane as industrial supply dwindles

Brisbane’s industrial market may have already reached the top of its cycle, with investment yields expected to continue to strengthen in the short to medium term.

That is the finding of a CBRE market review, with the projected strengthening the result of buyers pursuing a limited pool of available assets.

CBRE senior director of Queensland Industrial, Ed Bull says Brisbane is approaching its peak.

“If we are not at the top of the cycle then we are very close when it comes to prime investments with long-term leases and quality covenants,” Bull says.

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“However, we can still see some yield compression for the right type of asset throughout 2016, due to the sheer weight of capital and a favourable interest rate environment.”

CBRE is forecasting that there will a heightened buyer focus on assets with a shorter lease expiry or some underlying vacancy where there is potential to achieve initial investment yields of 8% plus.

Bull adds that there are a number of assets currently in the market that fit this profile, which will test buyer appetite for stock that was deemed secondary”.

“The expectation is that buyers who have secured prime assets in the past 12 months will pursue accretive opportunities such as this to balance their portfolios,” he says.

A freestanding office and warehouse in Tingalpa will go to auction on May 18.

“As a result, we expect the secondary market will be where the majority of the yield compression occurs in the short to medium term.”

Properties currently on the market include an industrial warehouse at 803 Beaudesert Rd, Archerfield, with two-street access within a high profile position.

The freestanding 600sqm building is located on a  large 2176sqm lot, which is zoned general industry A. Listed with Raine and Horne Commercial, it is for sale via an on-site auction on May 18, if not sold prior.

A 1361sqm freestanding office and warehouse facility at 24 Container St, Tingalpa, will also go to auction on May 18, if not sold prior.

The secondary market will be where the majority of the yield compression occurs in the short to medium term

Listed with Colliers International, the property includes a 1251sqm high bay, clearspan warehouse and 110sqm office space over two levels.

Meanwhile, CBRE is marketing a 2945sqm industrial warehouse located at 32 Ashover Rd, Rocklea.

Leased to RGM Maintenance on a brand new 10-year lease, the property has an annual net income of $300,000, with additional $41,006 income from telephone towers.

An industrial warehouse with double street access at Archerfield is up for sale.

Bull says the current high level of buyer demand follows a strong finish to 2015, with a significant volume of transactions taking place in the final quarter of the year – driving aggressive yields for quality stock.

However, he notes that the limiting factor to this continuing will be the ability to bring stock to the market as vendors attempted to “pick the top of the cycle”.

Heightened offshore buyer interest in Brisbane will be another consideration, with overseas groups having already completed several industrial acquisitions in 2015.

“There are early signs that these groups wish to build on their existing Australian portfolios and there are still several offshore groups yet to make a move,” Bull says.

“If appropriate stock is available, this offshore buyer interest will assist in maintaining strong transaction levels in Brisbane in line with 2014 and 2015.”

Strengthening leasing fundamentals will be another positive for the market, as vacancy rates continue to reduce.

“Overall, there is a positive outlook for the industrial investment sector in Brisbane and we are watching the leasing market closely as, when this gains momentum, the market can turn very quickly to have an undersupply of A-grade product,” Bull says.