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Vacancy Down In Brisbane’s Industrial Market

Vacancy Down In Brisbane’s Industrial Market

Industrial vacancy rates have trended down in Brisbane by 1.8 per cent over the past quarter – the second consecutive fall recorded for Brisbane, according to Knight Frank’s latest Brisbane Industrial Vacancy Research report.

According to Knight Frank’s Head of Industrial, Australia, Greg Russell, despite vacancy remaining above average, the total vacancy is beginning to respond to a lull in backfill space and a reduction in new sub-lease space.

“Take-up of vacant industrial space was strong over the majority of 2015, following a slow start in the first quarter of the year. Enquiry levels have remained patchy, with solid periods of enquiry followed by quieter times in the market.

“Demand has continued to arise from transport and 3PL users, as well as those companies related to the building industry,” said Mr Russell.

According to the report, the level of available space within the Brisbane Industrial market decreased by 11,818 square metres over the past quarter to sit at 640,996 square metres as at January 2016.

“In tandem with the reduction in total vacancy, the time on the market has reduced slightly across the available space to currently average 15.1 months.”

The level of prime space fell by 8.8 per cent over the quarter to 313,511 square metres, with absorption of prime space dominating the quarter.

In contrast the secondary space available increased by six per cent to total 327,485 square metres over the final quarter of 2015.

All available industrial space is split relatively evenly between prime (49 per cent) and secondary (51 per cent), according to the report.

Mr Russell said available space remains dominated by warehouse-style buildings, according for 81 per cent of the total. “In line with the reduced expenditure in the resource sector, manufacturing and metal fabrication demand has remained subdued. This has impacted demand for vacant space.

“Manufacturing stock has a current time on the market of 20.2 months, in comparison with warehouse stock, which averages 13.5 months,” said Mr Russell.

Knight Frank’s Senior Director, Research, Queensland, Jennelle Wilson, said three precincts recorded significant falls in vacancy in the final quarter of 2015.

“TradeCoast was down 18 per cent; the Greater North was down 18.9 per cent; while the South West was down 21.5 per cent. Knight Frank recorded a total reduction in available space of 62,978 square metres.

“The other three precincts balanced out these figures, recording increases with the North up 8.9 per cent; South up 18 per cent and South East up by 12.8 per cent – meaning that the overall reduction in vacancy was only modest,” said Ms Wilson.

According to Ms Wilson, “Despite the total vacancy decreasing over the past two quarters, the level is still at historically high levels and the market continues to favour tenants.

“Market rents are showing a softening trend with discounting of advertised face rents and incentives firmly in the market.

“Increasingly, landlords are accepting that rents on new leases will be lower than the passing rent from existing leases which had fixed reviews.”

“This has extended to making strong offers to sitting tenants, who had been considering relocation, in order to maintainn an income stream over the asset and avoid vacancy.”

Ms Wilson said the forecast new supply for 2016 appears to be in line with that of 2015, with a number of the ‘proposed’ projects to potentially be deferred into 2017.

“Investment market conditions have remained solid for prime assets, with yields sub-seven per cent for modern, long weighted average lease expiry opportunities. Although, yields for assets with exposure to vacancy have appeared to plateau.

“These high prices achievable for new, long-leased assets has continued to spur both speculative development and low pre-commitmente rents, which will create further backfill space – although not at the pace that was seen in early 2015.

“While the vacancy appears to be trending down and take-up has remained strong, the market rents remain soft,” concluded Ms Wilson.


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Charter Hall gains northern exposure

Charter Hall

Charter Hall has paid $19.7 million for an industrial property at Brendale, in Brisbane’s northern suburbs, an area increasingly attracting institutional investor interest.

JLL director of industrial Nick Bandiera, who brokered the sale with colleagues Sam Byrne and Tim Jones, said the 5-hectare site offered passing income and development potential.

“The large scale and underutilised nature of the property appealed to Charter Hall, given its current industrial use, with the future capability of developing the site to a higher and better use given its broad zoning,” Mr Bandiera said.

“The north side has historically been predominantly privately owned. However, we are seeing a shift in that balance as tenant demand and scale continue to grow.”

“The northern Brisbane industrial market is experiencing strong inflows of institutional capital, which is set to reshape the landscape over the next few years.”

Owned by a syndicate of Victorian-based investors for decades, the site at 23-25 South Pine Road is adjacent to Strathpine Train Station, a major stop on the $1.15 billion Moreton Bay Rail Link.

“The property is primarily leased to international logistics and shipping company Wallenius Wilhelmsen Solutions, which uses the facility for the storage and assembling of agricultural and logistics equipment,” said JLL’s Sam Byrne.


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Cromwell Spends $185m on Golden Triangle Tower

ISPT has sold its recently renovated tower in Brisbane’s golden triangle for $184.7 million to Cromwell Property Group for its DPF fund.

The 24-storey office tower at 100 Creek Street, Brisbane has a net lettable area of 20,223 square metres.

It is the second purchase for the fund in Brisbane after it secured the former Flight Centre headquarters at 545 Queen Street for $117.5 million in May.

Meanwhile, Cromwell Funds Management Limited sold its nine-storey Icon office tower in Ipswich for $144.9 million a month ago.

The Creek Street building has a mix of tenants, a 6-star NABERS indoor rating, end-of-trip facilities and floor-to-ceiling glass panelling.

The sale follows another golden triangle transaction, in August, when Fortius Funds Management and PGIM bought a similar sized building at 307 Queen Street for $214 million.

The surge of transaction in the area comes as Brisbane occupancy drops to 51 per cent, according to the Property Council of Australia.


▲ The golden triangle is bounded by Edward, Queen and Eagle Streets and is a financial district in the Brisbane CBD.

Cromwell head of retail funds management Hamish Wehl said it was a landmark building and stellar addition to the fund.

“The asset has a sensational location, benefits from great amenity and has been recently substantially refurbished,” Wehl said.

“It’s earnings accretive to DPF and will support the fund’s long-standing track record of paying unitholders a regular reliable income.”

ISPT spent $10 million upgrading the 100 Creek Street building in 2018, giving it new bathrooms, a semi-open foyer as well as creating a French provincial style laneway market.

The direct property fund has an annualised distribution yield of 5.4 per cent with nine office assets in Queensland, NSW, Victoria and the ACT.

The acquisition is subject to Foreign Investment Review Board approval and is expected to settle towards the end of November.



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Hope Island’s Peninsula Collection apartments show great appeal to interstate and international investors

Peninsula Collection

The Peninsula Collection has 63 apartments, starting from a low $565,000 for the three-bedroom apartments

The ASX-listed ASF Group have released the final opportunity to buy in their unrepeatable gated Hope Island community, The Peninsula.

Peninsula Collection is the final instalment of apartments in the master-planned development on Harbourview Drive, which is located in the highly sought-after Hope Island Resort.

ASF has already sold out Peninsula Homes, a collection of 17 townhouses, Peninsula Residences, comprising 40 apartments, and Peninsula Terraces, just 22 terraces, which sit along side the Peninsula Collection.

The Peninsula Collection has 63 apartments, starting from a low $565,000 for the three-bedroom apartments. Since the official launch of Peninsula Collection last month, more than 10 apartments have already been snapped up

They’re likely to be popular with investors, particularly internationally, with Hope Island Resort featuring Foreign Investment Review Board (FIRB) exemption. This gives investors a global re-sale market for future capital returns seldom found in other developments in Australia.

The project is also offering a three-year rental guarantee of five per cent per annum, along with the option for property management services.

Hope Island apartments have seen 3.8 per cent price growth per annum over the past 10 years, according to SQM Research. In the last 12 months, apartments have seen 16.5 per cent growth.

This can be attributed to a number of factors, not least of which is shortage of supply. According to property consultants Urbis in 2019, The North Shore precinct, which includes Hope Island, was the most undersupplied market on the Gold Coast for apartment buyers. A situation which hasn’t see much improvement until recently with five new apartment developments set for Hope Island.

Rental stock has also remained extremely tight on Hope Island.

The 2032 Brisbane Olympics announcement is also backing up this data, ensuring investment from both private and public sectors upwards of hundreds of millions of dollars in infrastructure and more in the near and long term.

Peninsula Collection

Peninsula Collection 52 Harbourview Drive, Hope Island QLD 4212 

Three-bedroom apartments in Peninsula start from $565,000, below the suburb median of $579,000, according to SQM.

Rents have also been on the rise with rental asking prices up 24.8 per cent in the past year and 4.4 per cent per annum for the past 10 years.

‘The Peninsula, as an exclusive gated community development on Hope Island Resort’s unique river canal, is located within one kilometre of three golf courses, across the road from the Azzura Greens Resort and Links Hope Island Golf Club.

It’s one of the closest new developments near the Hope Island Shopping Centre, reachable on buggy or foot.


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