BRISBANE, QUEENSLAND, AUSTRALIA
TMX Transform's Daniel Byrne, Associate Director of Property, reviews the 2024 market and looks ahead to what we can expect in 2025.
Over the past year, occupiers have been faced with a continued growth in prime face rents, now averaging above AUD $160/sqm for facilities over 5,000sqm. Compared to 2023, the market has seen an increase equating to 8.6 percent.
Rental growth in Brisbane has outpaced both Sydney and Melbourne markets due to a multitude of factors, including restricted land supply, increased land values and construction costs, plus low vacancy rates throughout core markets. Prime yields remained steady throughout Brisbane, ranging from 5.50 percent to 6.50 percent.
The take-up volume over the past 12 months has been c.693,700sqm, resulting in the slowest calendar year since 2018 (pre-pandemic). With face rents increasing, option periods and renewals are becoming highly desirable to occupiers. Recutting lease renewals to factor in refurbishment or extension works has become common practice as occupiers wait out for macro-economic conditions to soften.
READ MORE: Construction begins on Martin Brower's new Brisbane warehouse
In 2024, Brisbane’s industrial market has seen the addition of c.700,000sqm of new supply delivered through speculative and greenfield developments.
The significant amount of additional space has in turn led to increased vacancy rates across each of the precincts now ranging between 1.7 percent (Trade Coast) – 4 percent (South). Although each industrial precinct has immediate options available, the flight to quality is continuing to drive rents in core locations and forcing budget focused occupiers to sacrifice price, layout, and locational preferences.
Construction costs through Brisbane’s industrial market have mostly stabilized throughout 2024 and notably reduced by up to 5-10 percent in several instances. Sub-contractor trade coverage has become more accessible, which in turn is driving competitive pricing and pressuring builders to hold pricing validity longer. Confidence in development feasibilities allows developers to have certainty around pipeline and occupiers to have confidence in their program.
READ MORE: L'Oreal Groupe officially opens Queensland Distribution Centre worth $40M
2024 marked five years since the beginning of the “pandemic industrial boom”.
Occupiers are re-entering a starkly different marketplace as they begin coming off historic rents agreed five–ten years ago. Decision making processes are in turn dragging out, making it imperative to strategize property decisions well ahead of time to pressure test the market and validate business case decisions.
READ MORE: API starts construction on new fulfilment centre in Queensland
What should occupiers expect in 2025?
Incentives to increase
Expect higher incentives to be achievable throughout 2025 but for developers to hold high face rents. Several significant brownfield and speculative facilities are due to become available early in the year, which will soften demand and in turn, place additional pressures on landlords and developers. Utilizing recent deal data and market insights is critical to maximize incentives.
Reduced developer appetite for bespoke developments
Whilst cash remains expensive and land supply remains tight, developers are prioritizing standardized facilities with high site cover ratios to maximize returns. Low site cover solutions are particularly challenging to obtain unless occupiers are willing to sacrifice location or are willing to pay a high premium. Occupiers need to have their finger on the pulse and ability to move quickly when suitable existing sites become available.
Criticality of timing and leverage
Project timeframes are continuing to drag out as both developers and occupiers are faced with various commercial pressures. Historically, commencing a process 18 – 24-months prior to expiry would be sufficient time to drive the optimal outcome. But now, without commencing a process 24 – 30 months prior to expiry, occupiers are faced with restricted availability and lack suitable alternative property solutions. Commencing a property strategy early is key to creating competitive tension throughout negotiations, be that for a new site or renewal of an existing lease.
Construction pricing to hold firm
After year-on-year construction pricing growth in Brisbane’s industrial market the 2025 outlook is shaping to have minimal construction cost escalation, as occupiers can expect to have competitive pricing for tenders, particularly in the first half of the year.
The environment is likely to change towards the back end of 2025 as industrial projects commence works, along with an extensive government infrastructure pipeline tending for work in relation to the 2032 Brisbane Olympics. Issuing tenders to the market in the first half of 2025 is likely to drive the best commercial results.
READ MORE: Healthcare and pharma's rapid investment in industrial space
TMX in Queensland
Some highlights from our completed projects in Queensland this year include:
- Australian Pharmaceutical Industries (API) in Berrinba (26,000sqm);
- Martin Brower in Berrinba (10,000sqm);
- L'Oréal in Redbank (14,500sqm); and
- Lawrence & Hanson in Redbank (12,000sqm).
For more insights into property, check out our Quarterly Property Reports.
