Why industrial is the new Brisbane buzz word
Brisbane’s industrial market is expected to experience a significant turnaround, with expectations the sector will boom in the second half of the year.
A new Savills market briefing highlights the benefit of the lower Australian dollar and a higher level of construction activity driven by infrastructure, such as the build up for the Commonwealth Games on the Gold Coast and major projects, including the Gateway Upgrade North.
Independent forecasters Deloitte Access Economics have also forecast industrial production in Queensland to rebound to better than 6% annual growth by June, with a $2 billion growth spurt (equivalent to 14%) between June 2016 and June 2018, outstripping the modest projected growth in New South Wales and Victoria.
“With the outlook now one of the dollar stabilising below 70 cents US, it looks promising for the forecast lift in industrial production, a rise of 14% over the two-year period from June 2016 to June 2018, to actually be realised,” Savills’ report states.
This demand will continue into 2016 with buyers being increasingly attracted to the long term security that industrial properties can provide
Savills says that while the Brisbane industrial market had one of its quieter years in 2015 due to the end of the mining investment boom, the easing of government infrastructure spending and business confidence remaining weak, “there are signs that industrial activity is going to move up a gear later in the year”.
Savills reports that there was only about $870 million worth of reported industrial property transactions (greater than $2 million) in the 12 months to December 2015, down from $913 million in the previous year.
This figure was, however, up on the five-year average of $651 million.
The highlight of last year remains the $1.073 billion purchase of the GIC portfolio by Singapore-based Ascendas, which encompassed assets from Victoria, New South Wales and Queensland, including seven Brisbane properties worth $317.2 million.
The report comes as Colliers International kicked off the new year by brokering the sale of a substantial, fully leased industrial investment in Chermside to a high net worth investor.
The property, which is fully occupied by PVC and polyethylene piping systems manufacturer Vinidex Pty Ltd on a five-year lease, was sold for $6.5 million, representing a yield of 9.4%.
Colliers International director Anthony White says: “The buyer moved very quickly to secure this asset with the period from first inspection to settlement being less than 30 days.”
“The freehold property, which consists of two buildings spanning 5533sqm, is fully leased to Vinidex Pty Ltd. They have signed a five-year lease effective from January 2016, on a net passing rental of $610,628 per annum.”
There are signs that industrial activity is going to move up a gear later in the year
White says the relative safety of industrial investments would continue to make them a target for buyers.
“This demand will continue into 2016 with buyers being increasingly attracted to the long term security that industrial properties can provide, particularly as volatility hits other asset classes,” he says.
Savills says foreign investor and private investor purchaser categories were the most active in the industrial market last year, buying 41% and 21% respectively of properties sold.
The private investor category recorded the most transactions, with 30 deals.
Brisbane prime industrial yields last year were between 7% and 7.5% in the Southside and Northside areas, and between 6.5% and 7.5% on the Trade Coast.