Mining boom makes it mark on Brisbane industrial market
April 30, 2012
Queensland’s mining and resources boom is having a strong impact on Brisbane’s industrial property market, according to the latest research from Colliers International.
The Colliers International Brisbane Industrial Research and Forecast Report found the mining sector had a more dominating presence in terms of activity over the first half of this year, especially in the leasing market, with almost one in four major leases of industrial facilities of more than 2000 sq m signed by mining-related companies.
The report also found there was also a sizeable spike in sales and leases of land to firms engaged in services relating to the mines.
Troy Whalan, Colliers International Industrial Director, said it was now clear the multi-billion dollar investment in mining and resources in Queensland - with around $60 billion in projects under construction and another $50 billion planned - was having a real impact on the Brisbane industrial property market, particularly in Brisbane’s sought-after Outer South and Outer South West precincts.
“Demand for space in the southside industrial precinct, which incorporates Acacia Ridge, Salisbury, Rocklea and Coopers Plains strengthened going into the second half of 2011, with a noticeable increase in activity amongst firms related to the mining and resources sector in that area,” he said.
“Firms such as World Wide Cables and Mainfreight have bought parcels of land in that precinct, both in the suburb of Larapinta. World Wide Cables purchased a 9215sq m parcel at 22 Axis Place for $250/sq m within the Radius Industrial City, with plans to construct and occupy a warehouse facility on the site to service their mining and resources sector clients. Meanwhile, Mainfreight took ownership of Australand’s 54,000sq m property at 20 Distribution Street at a rate of around $295/sq m.
“Sites in Berrinba have also been sold over the first quarter – one example is ATCO, which bought two parcels in the suburb with a total site area of 97,000sq m at a rate of $245/sq m.
“Brisbane’s south is highly sought after because it is a transport infrastructure-rich corridor, positioned near major roads that provide excellent access to both Melbourne and Sydney, as well as to the Brisbane CBD, port of Brisbane and mining areas in Queensland, such as the Surat and Galilee Basins.”
While a lot of activity in the Brisbane industrial market stems from the mining and resources boom, Mr Whalan said there was still plenty of demand for industrial land from other users, such as logistics, wholesaling and manufacturing.
“Demand from all these sectors is continuing to impact on the total land supply,” he said.
“Sites along the Logan Motorway and in the southern precincts remain tightly held and industrial parcels available for development are increasingly limited. In addition, speculative development remains modest with Australand the only significant developer active in the larger warehouse market.”
The Colliers International Brisbane Industrial Research and Forecast Report found that overall, transaction volumes in the Brisbane industrial market fell over the first half of 2012. Over the period there were 14 sales over $5 million totalling more than $147 million, with only one sale greater than $20 million, which was down on the previous six months, when there were 19 sales totalling more than $250 million.
“While there are still difficulties for developers in obtaining finance for projects, the drop in activity in the Brisbane industrial market can largely be attributed to the increasing shortage of available sites in the Brisbane market,” Mr Whalan said. “Firms are finding it much harder to find good sites, so they’re unable to enter into transactions.
“Confidence is also a factor, with some continuing uncertainty about global economic conditions. Going forward, however, it is likely confidence will improve, especially now the Queensland state election has been decided.”
Mark Courtney, Colliers International Research Director, said confidence was also likely to improve in Queensland with strong projections for economic growth in the state moving forward.
“Annual growth in Queensland’s gross domestic product is forecast to rise sharply in the coming years, driven by significant spending – in the order of $40 billion - on massive resource sector engineering projects,” he said.
“Although there has been little change in rents, yields and prices during the first half of 2012, demand for prime investment grade industrial assets is expected to build over the year, supported by projected above national average annual economic growth rates and strong growth in containerized trade through our ports.”
Mr Courtney said the tight conditions of new supply were expected to impact the Brisbane industrial market in the near term, with construction of new speculative product above 10,000sq m in gross lettable area almost non-existent.
“The development pipeline does not currently contain enough speculative product to prevent upward pressure on rents from building,” he said.
“While rents for prime grade assets are likely to be steady this year, rising by two to four per cent, within two years they are predicted to be stronger, growing by five per cent per annum for prime assets.
“Meanwhile, yields will compress marginally this year – by around 25 basis points – and capital values will move accordingly.”
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