In 2013, we predicted that the total value of the Brisbane industrial market would exceed that of Melbourne by 2022. Our prediction remains on track, with yields continuing to firm and international interest in our market at an all-time high.
So why is Brisbane so hot?
Infrastructure
Infrastructure projects create employment, attract additional investment and add value to real estate markets. Between 2000 and 2010, Brisbane’s average per capita investment in infrastructure was 75 per cent higher than the average of the other states and territories. Since 2010, AirportLinkM7, the Port of Brisbane Motorway (Stage 2), and the Ipswich Motorway upgrade have completed, and over the coming months Legacy Way will open and link the Australia TradeCoast to Brisbane’s western corridor. The more than $8.5 billion invested in these projects has directly improved the efficiency and value of Brisbane’s industrial real estate, benefiting occupiers and investors.
Economy
Brisbane’s economy is expected to grow by 60 per cent to $217 billion by 2031, by which stage we expect to have a population of 3 million people (a ~50 per cent increase). Our economy is diversifying, with less reliance on mining investment and a shift towards innovation and knowledge industries. Sustainable, long term economic and population growth will continue to create opportunities for industry and industrial real estate investors as consumption demand increases.
Port of Brisbane
Efficient ports generate employment and economic growth. Brisbane’s Port accounts for 95 per cent of Queensland’s container and car freight, ~100 per cent of its meat exports and half of its agricultural exports. The Port of Brisbane (PoB) has allocated $600 million to infrastructure upgrades over the next few years. As Queensland consumption increases, so too will container throughput and demand for Port-related real estate. Freehold land supply near the Port is severely constrained, creating leasing opportunities for PoB, and huge capital growth potential for investors.
The planned expansion of the Port of BrisbaneTransparency & Maturity
Goodman, Charter Hall, DEXUS, Australand, Stockland, GPT and Lend Lease are all major owners of Brisbane industrial real estate, having built and/or acquired substantial portfolios over the last 10 years. This high level of institutional ownership creates transparency, competitive tension and forward-thinking investment backed by wholesale and institutional investor capital. Their continued investment in Brisbane brings with it quality, world-standard developments which maximize occupier efficiencies, and further attract investors from around the globe.
Outlook
Brisbane industrial investment transactions over $5 million were well above $600 million in 2014, with a substantial pipeline of new transactions now underway. Speculative development continues, and total construction in 2015 will surpass the 10 year average. Although tenant demand pulled back last year, a rebound in the short term is inevitable as occupiers search for efficiencies. Rents will be flat during 2015, and are expected to grow by around 1.5 per cent next year, and 3 per cent in 2017 as demand returns and outstrips supply. Total return investors will continue to prove aggressive, and Australian REITs will continue to actively develop new space in search of higher returns.
Wholesale capital inflows will increase as more global investors are attracted to Australia’s relative value and high transparency. Brisbane, Australia’s third largest market, will be a major beneficiary of this new wave of capital. And within 8 years, will be Australia’s second most valuable industrial market.
Brisbane has its mojo, and its industrial market is firing.
Article by Aaron Bates first published via Pulse
