Brisbane Falling Behind as Supply Chokes Industrial Growth

The industrial pickings in Brisbane are getting slimmer by the day as it fails to keep up with a rapidly rising population and surging demand. And with not enough new space being built, as well as a constrained land supply holding back the sector, the writing is on the wall. Speaking at a Property Council of Australia event last week, CBRE head of industrial, logistics and data centre research in Australia Sass Jalili said the rule of thumb was 4.5sq m of industrial and logistics space per person. “In Brisbane there’s a deficit,” she said. “We’ve got a forecasted 355,000 people expected to be added to the market, which means about 1.6 million sq m is required.” Most of the 2024 pipeline has been absorbed in the market. And, Jalili said, the pre-commitment level for the forward pipeline beyond 2024 was currently just over one-third. “Essentially we need, based on the population growth, about 400,000sq m of new space per annum to keep up with Brisbane’s population growth over the next four years,” she said. “What is currently in the pipeline for this period is 255,000sq m per annum.” But it all comes down to supply of industrial zoned land. ▲ CBRE head of industrial, logistics and data centre research in Australia Sass Jalili speaking at the PCA event in Brisbane. “Land constraint is certainly having an effect on the amount of new supply being delivered,” Jalili said. “Land absorption has averaged about 143ha per annum over the past five years versus land supply averaging at 117ha per annum over that same period.” And the demand for space from growth industries is rapidly increasing. Currently, transport and warehousing were the biggest occupier, followed by retail and manufacturing. Jalili says the e-commerce penetration rate, closely linked to logistics space, will rise from 13.5 per cent in 2024 to 15 per cent in 2027. Data centres have doubled their land size requirements in Australia as the impact of data sovereignty, AI and cloud computing continues to create seismic change. But there was one other key area that Jalili has tipped to grow in the industrial and logistics sector. Jalili said the market would reach equilibrium when it reaches 4 per cent vacancy. This was when she expected there to be “limited rental growth in the market” but was at least 12 months away, she said. Industry leaders also say more needs to be done to unlock growth regions and boost industrial zoned land supply as Brisbane stares down the barrel of a supply cliff. ▲ Ethos Urban national industrial lead Angus Halligan. Areas such as North Maclean and Swanbank have growth potential, according to Ethos Urban national industrial lead Angus Halligan. “We can’t just be thinking about the Australian Trade Coast,” Halligan said. “What are we doing as a state government to unlock new areas? It’s hard for industry to do that on its own.” Jalili says the land absorption in 2024 was concentrated in the western corridor, accounting for about 25 per cent. In Brisbane, there is currently 6400ha of industrial zoned land. Brisbane is home to around 2.6 million people, 10 per cent of the country’s population. “Based on the total industrial zoned land, there is about 2.4ha of industrial zoned land per 1000 people. This is significantly lower than Melbourne which has 5.2ha per 1000 people, and on par with the most land constrained market, being Sydney,” she said. In 10 years time if the land supply does not change, Jalili says that rate would drop to 2ha per 1000 people. Jalili said Australia is still experiencing low vacancy rates within the sector compared to the global market and “we’ve seen very strong rental growth” for all the markets across Australia. Land constraints stymie growth ▲ Source: CBRE The latest Cushman &amp; Wakefield data shows the tightening industrial market in Queensland has led to a significant uptick in investor activity, with total investment volumes in Brisbane reaching about $500 million so far in 2024—up 16 per cent from the same period last year. Its research also indicated the market conditions were such that volumes were on track to surpass the $620 million transacted in 2023. Up to September, more than $300 million of assets were under due diligence, pointing to a strong pipeline of future deals. In one of the most recent transactions, a 13,763sq m office-warehouse facility at 616 Boundary Road at Richlands changed hands for $26.75 million. It was acquired by Xiao Hong Darveniza—known as Jane—the widow of property multimillionaire Bojan Darveniza, who died in 2010. The facility was offloaded by fund manager Centuria, which purchased the property off-market in 2018 for $15.9 million. Marketing agents Matthew Frazer-Ryan and Jack Hardy from CBRE negotiated the sale of the fully-leased asset, which sits on a 3.13ha site. Frazer-Ryan said site drew interest from multiple parties based on the landholding’s strategic infill location within the Richlands industrial market. “Due to the low vacancy levels and significant take-up recorded within Brisbane’s western corridor over the past few years, significant growth in rents has been observed in this precinct,” he said. Hardy added: “Over the past 12 months, the western corridor has recorded the strongest land value growth for both small and large lots, increasing by an average 50 per cent year-on-year. ▲ Centuria has offloaded a 13,763sq m office-warehouse facility asset, pictured above and top , at Richlands for $26.75 million. “The tightly held nature of this market, and the significant size of the site, made the property very appealing.” Meanwhile, despite the slim pickings, developers are continuing to find opportunities to turn dirt. Plans have been filed for a boutique warehouse development comprising 23 tenancies across four two-storey buildings, also at Richlands, about 18km south-west of the Brisbane CBD. It has been lodged by Potter Projects for a 4987sq m site spanning two lots at 17 and 40 Network Place, which changed hands in July for $5.28 million. The proposed warehouse tenancies would occupy a gross floor area totalling 3704 square metres and 60 car parks plus two loading bays also would be provided within the development. “These spaces are intended to be ideal for home-based businesses that have outgrown home setups, e-commerce businesses, and other small-scale enterprises and individuals needing storage for product,” a planning report said. As well, it said, the warehouses also could be used as personal/domestic storage spaces for residents in Brisbane’s west. “The observed scarcity of facilities tailored for small-scale operations in the area aligning with the growing demand for such spaces as opposed to larger, conventional warehouses is the driver for the proposed development,” the documents said. “Its value proposition lies in its architectural form and suitability for purpose, catering to a different purpose and business demographic as opposed to typical industrial warehouses.” You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

Brisbane Falling Behind as Supply Chokes Industrial Growth

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