Brisbane industrial demand below 10-year quarterly average

Occupier demand was at 108,400sqm in Q1.

Occupier demand, as measured by gross take-up (>3,000 sqm) totalled 108,400 sqm in Brisbane in 1Q22. 

According to JLL, this is below the 10-year quarterly average of 120,900 sqm; however, above the 10-year first quarterly average of 98,100 sqm. It is normal for demand to be lower in the first quarter of the year, as occupier activity and leasing deals are generally stagnant for the first month of the quarter.

Here’s more from JLL:

No leasing deals above 3,000 sqm were recorded in the Northern precinct over the quarter. The Northern quarter historically has recorded minimal occupier activity over 3,000 sqm. The Southern precinct recorded 86,100 sqm of take-up in 1Q22, accounting for 79.5% of total take-up across Brisbane. The Trade Coast precinct made up the balance, recording 22,300 sqm of gross take-up.

Only the Southern precinct recorded completions in 1Q22

Two projects reached completion over the quarter in the Brisbane market, totalling 140,300 sqm. Both of these were situated in the Southern precinct, the largest being the completion of the second stage of the Creastmead Industrial Estate, totalling 127,500 sqm. The second project to complete was 430 Sherbrooke Road, Willawong. The 12,800 sqm development was fully pre-committed upon completion.

There are currently 422,700 sqm of projects under construction across 24 projects in the Brisbane industrial market. Twenty-two of these projects (337,700 sqm) are expected to complete over 2022, with the remaining two (85,000 sqm) completing in 2023. In addition, there is 906,400 sqm of plans approved stock in the pipeline, of which, 86.3% is situated in the Southern precinct.

The Northern precinct recorded significant rental growth in 1Q22

All three precincts recorded prime net rental growth over the quarter. Rents grew moderately in the Southern (0.9%) and Trade Coast (1.6%) precinct, while the Northern precinct (4.9%) had significant quarterly rental growth. This figure takes the 12-month rental growth for the precinct to 12.1%. Prime incentives also decreased across all three precincts over the quarter.

Prime yield compression was recorded in the Northern (13 bps) and Trade Coast (13 bps) precincts over the quarter, with the mid-point in both of these precincts sharpening to 4.63%. The mid-point of the prime Southern yield range remained unchanged at 4.5% over the quarter. The secondary yield range across all precincts sharpened slightly over the quarter to a mid-point of 6.0%.

Outlook: Demand from occupiers is offset by the future supply pipeline

Demand is expected to remain considerable over 2022, as transport/logistics, manufacturing, and food retailing sectors contribute to take-up across the Brisbane market. This demand is expected to push rental growth in the Northern and Trade Coast precincts, while the significant supply pipeline in the Southern precinct will mute much of the flow-on effect to direct rental growth to the area.

Land values have increased considerably over the past 12 months, spurred on by land scarcity and appetite to develop new projects. The average 2,000 sqm lot has increased 24.6% in value over the quarter, while the average 1Ha block has increased 20.0%. Large sized blocks, 2-5 Ha, have increased 28.8% over the quarter. Rising land values will have implications for rents in developer feasibilities.

Note: Brisbane Logistics & Industrial refers to Brisbane's industrial market (all grades).