The industrial sector emerged from the COVID-19 pandemic as a popular asset class with investors. Whilst the pandemic softened demand fundamentals in the more traditional sectors of office and retail, the industrial sector benefited from heightened occupier demand, driven by numerous factors including strong e-commerce growth and a return to more localised manufacturing. More recently, strong population growth has been a major driver of continued strength in the occupier market.
As a result of strong occupier demand, coupled with construction delays, the industrial market has witnessed extremely low vacancy rates. The low vacancy rate has driven rental growth at levels not seen before, as well as a sharp reduction in incentives, over the past year.
Following record levels of investment activity over previous years, transaction values have been subdued during 2023. Investors have displayed heighted caution this year given the uncertain economic and pricing environment. These conditions have resulted in a softening of circa 100 basis points in both prime and secondary industrial yields across the Southeast Queensland market.
Greater Brisbane industrial rents and yields – June qtr. 2023
Net face rents
$140/m2
Prime average
+11.3% y-o-y
$120/m2
Secondary average
+20.1% y-o-y
Yields
5.55%
Prime average
+93 bp y-o-y
6.50%
Secondary average
+106 bp y-o-y
Industrial market – Current state of play
Investment demand is expected to increase from early next year following an expected stabilisation in interest rates and higher certainty regarding the cost of debt.
