Commentary by Pat Cavanagh, Director of Industrial, Colliers International
Four out of five of our industrial sales in November have hit new records for the Gold Coast industrial market. Buyers across all asset classes are making strong bids on limited available stock, which is very reminiscent of the pre-GFC days when marketing a property would generate fierce competition, and in some cases would sell within 24 hours of being listed.
Record sales results have been achieved for the following:
- 27 Gibbs Street in Arundel, a freestanding 10 year old tilt slab warehouse sold at a record $2,047/sqm over building area.
- Industrial land at Ramly Drive in Burleigh Heads sold at $460/sqm;
- A Grade industrial investment asset located at 2/19 Harrington Street in Arundel sold with a 6.53 per cent yield, with only a three year lease; and
- Land sale at 45 Newheath Drive in Arundel, set a new record within the Gaven Central Industrial Estate at $411.50/sqm.
Since January this year our industrial team has seen a continuing trend of strong demand and capital growth of 10 per cent plus across all industrial asset classes. In 2016 YTD we have sold 28 industrial properties for a combined value of just under $50 million, with an additional $35 million worth of property either under contract or under due diligence negotiations.
All of these transactions are located across industrial precincts from Currumbin to Yatala, with the central core markets showing strong interest from all buyer groups - investors, developers and owner occupiers.
Owner occupiers have been particularly aggressive in chasing assets that suit their business needs and are willing to go above and beyond to secure them, generally through self-managed funds.
In terms of leasing transactions, this year we have completed 44 leases, totalling over 36,000sqm of building area. Again the core central markets showed the strongest demand. Key locations such as Arundel, Burleigh Heads, Nerang, Helensvale, Molendinar and Southport had the most tenant movement.
Majority of the vacant stock on the market that is available for lease is generating sale enquiry from owner occupiers, and we expect this demand to continue into 2017.
Business confidence is up due to strong tourism and construction sectors performing well, along with infrastructure projects associated to the Commonwealth Games and light rail stage 2.
Due to this and a continued low interest rate environment, owner occupiers are finding that purchasing is a better long term financial option than leasing. This trend is likely to continue into 2017.
We expect to see good capital growth as a result of the continued high levels of business confidence across the Gold Coast, with the flow on effects filtering through to the industrial property sector.
Landlords are feeling the pressure from leasing vacancy in an increasingly competitive market, where tenants are becoming owner occupiers and leasing activity is subdued due to lack of tenant demand.
In order to secure tenants landlords should reconsider rents and incentives to attract long term tenants, as well as structured annual increases to offer viable leasing solutions.
For tenants seeking good quality space between 1,000sqm to 10,000sqm the hotspots will continue to be strong logistic locations just off the M1 at Helensvale, Molendinar, Nerang and Burleigh where you can find B Grade facilities for lease ranging from $80/sqm and A Grade facilities up to $120/sqm.
Considering the available investment stock is in short supply, any vacant or leased assets that go up for sale will continue to be hotly contested, leading to multiple bids and ultimately good capital growth in the short term. Over the next two or three years investors will be turning to property as a more practical and higher yielding investment option.