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Brisbane's economy may not be firing on all cylinders, but the industrial real estate market here is still ticking over.
We've put together a snapshot of the industrial market in Brisbane right now.
Despite that fact, you're by no means guaranteed success as a lease holder or an investor in Brisbane. You'll need a sound knowledge of the market, a clear idea of what you need and the right advice to make sure that your decision helps achieve your goals.
To that end we've put together a snapshot of industrial real estate in Brisbane right now, using Ray White's in-depth commercial research.
This is the state of play.
Rents are showing signs of stabilising
Average rents for Brisbane industrial real estate have been in steady decline for almost three years. Leasees will have been relishing the drops, securing the space that they needed at extremely affordable prices, and possibly even with no in-built increases.
Speculative development has caused some problems with oversupply throughout Brisbane, increasing vacancy rates and putting downwards pressure on rents once again. Despite these signs, Ray White's data shows that rents in the area have remained stable recently and have even stopped dropping - a promising indicator for the future of the region's market. Additionally, some speculative developments have seen success in securing tenants upon completion, and the pre-lease market remains strong.
Average rents have been recorded at $106/sqm for the Australian Trade Coast, $101/sqm in the South precinct and $100/sqm in the Logan Motorway precinct. These may not be particularly stellar figures, but promisingly, they're up by roughly five per cent on the same numbers from the beginning of the year.
Ray White's data shows that rents in the area have remained stable recently and even stopped dropping.
Thanks to stable rents and increasing competition, leasors have had to compete hard for tenants, and this has resulted in an increase in incentive levels. Investing in industrial property in Brisbane certainly comes with inherent risks, particularly in the current market. However, if you purchase the right property, preferably with a solid lease contract and reliable long term tenant already in place, your investment can still produce great results.
For leasees, on the other hand, these are the ideal conditions in which to secure an excellent deal on your premises. With vacancies remaining reasonably high, and the secondary market struggling, you'll have plenty of leverage when negotiating favourable terms for your lease.
Increasing demand coming from a variety of industries
One of the most promising indicators of the current state of Brisbane's market is the rising demand from a variety of different sectors. Ray White data shows that, impressively, the first nine months of this year included roughly 320,000sqm of new tenant demand for the Brisbane Industrial (over 5,000sqm) market.
During the same time last year total new demand was less then 200,000sqm. This massive increase might just be the saving grace of the industrial market, helping to balance out oversupply and placing upwards pressure on rents helping them to remain stable.
New demand has come from a variety of different sectors, with greater enquiry from the manufacturing industry.
This new demand has come from a variety of different sectors, with greater enquiry from the manufacturing industry, Transport and Logistics, and consumer facing tenants.
These consumer-facing tenants and the manufacturing industry now make up a massive 65 per cent of new large tenancies.
The diversity in the market may be the result of increasing affordability throughout Brisbane. Large tenancies were once reserved solely for larger corporate logistics leasers, but today a wider range of businesses can afford such space.
If supply slows down in the near future and the demand trend continues as is, we may see rents and competition begin to rise. Now may just be the best time to get into a new space.
Speculative development continues
Despite high vacancies, the supply pipeline is set to flood the market with new stock over the next two years. There is currently a grand total of 665,000sqm of space scheduled for completion in 2019, comprising 39 projects, all over 5000sqm in size.
Considering the current demand trend, this may not result in the drastic vacancies that some are predicting. Over the next two years, this excess supply may affect vacancies. But demand could catch up and minimise the negative effects.
It's unclear exactly how this changing market will look years from now. However, it's certain that with professional advice and a smart strategy, both investors and leasees can still be successful.
