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Savills Research
Queensland
Spotlight
Brisbane Industrial
Highlights
 Savills identified approximately

485,286 square metres of industrial
accommodation leased in the Brisbane
metropolitan region for the 12 months
to March 2015
Prime industrial rents range from $105
to $145 per square metre net for prime
industrial space across Brisbane
 Savills recorded approximately $760

million of transactions in the 12 months
to March 2015
Investment yields for prime industrial
property range from 7.00% to 8.00%
in Brisbane
April 2015
Savills Research | Brisbane Industrial
April 2015
Savills Queensland Team
Research
Director
Paul Day
+61 (0) 7 3002 8860
pday@savills.com.au
Valuation & Consultancy
Director
Leigh Atkinson
+61 (0) 7 3002 8852
National Head of Advisory
Neil Murphy
+61 (0) 7 3002 8850
latkinson@savills.com.au
nmurphy@savills.com.au
Industrial Sales & Leasing
State Director
Callum Stenson
+61 (0) 7 3002 8832
Trade Coast
cstenson@savills.com.au
Manager
Shaw Harrison
+61 (0) 7 3002 8929
sharrison@savills.com.au
Executive
Peter Capps
+61 (0) 7 3002 8927
Executive
Alex Smith
+61 (0) 7 3002 8843
pcapps@savills.com.au
asmith@savills.com.au
Manager
Jason Rasmussen
+61 (0) 7 3002 8803
Associate Director
Ben Donnelly
+61 (0) 7 3002 8893
jrasmussen@savills.com.au
bdonnelly@savills.com.au
Northside
Southside
Logan Motorway / Gold Coast
Senior Executive
Jack Morrison
+61 (0) 7 3002 8889
Senior Executive
Myles Clentsmith
+61 (0) 7 3002 8912
jmorrison@savills.com.au
mclentsmith@savills.com.au
Project Management
State Director
Ken Ng
+61 (0) 7 3018 6705
kng@savills.com.au
Asset Management
State Director
Chris Ainsworth
+61 (0) 7 3002 8831
cainsworth@savills.com.au
Savills Queensland
Level 2, 66 Eagle Street
Brisbane QLD 4000
Phone :+61 (0) 7 3221 8355
savills.com.au
savills.com.au/research
2
Savills Research | Brisbane Industrial
April 2015
Introduction
Demand for industrial property in Brisbane continues to improve. Leasing activity is
particularly strong for prime grade quality warehousing especially freestanding product. This
has created good rental growth for prime grade warehousing over the 12 months to March
2015.
There has also been a number of speculative and design and construct deals take place
over the year which suggests renewed interest by major companies. Similarly on the sales
front there is strong competition for quality prime grade type assets positioned in close
proximity to major arterial roads and highways.
Brisbane Industrial Precincts
Precincts
Suburbs
TradeCoast
Hendra, Eagle Farm, Pinkenba, Morningside, Murarrie, Hemmant, Lytton,
Fisherman Island, Tingalpa, Wakerley and Cannon Hill
Southside
Yeerongpilly, Salisbury, Rocklea, Archerfield, Willawong, Acacia Ridge,
Coopers Plains, Eight Mile Plains, Seventeen Mile Rocks, Sumner, Darra,
Oxley, Wacol, Carole Park Richlands and Woodridge
Gold Coast / Logan Motorway
Corridor
Crestmead, Marsden, Browns Plains, Meadowbrook, Berrinba, Loganlea,
Loganholme, Heathwood, Larapinta, Parkinson, Underwood, Springwood,
Yatala, Stapylton and Ormeau
Northside
Zillmere, Geebung, Northgate, Banyo, Virginia, Morayfield, Caboolture,
Brendale, Strathpine, Petrie, North Lakes, Burpengary, Deception Bay and
Narangba
Ipswich
Goodna, Springfield, Redbank, Bremer, Ebenezer, Willowbank, Mutdapilly,
Purga, Swanbank, Ipswich, New Chum, Wulkuraka, Amberley, Bundamba,
Raceview and West Ipswich
Source: Savills Research
Infrastructure
Work continues on the port expansion at Fisherman Islands and Legacy Way (formerly
Northern Link) a tolled road tunnel that will connect the Western Freeway at Toowong with
the Inner City Bypass (ICB) at Kelvin Grove. Both these major projects will have a positive
impact on the distribution of goods, locations of warehouses and transport times in
Brisbane.
However, it is the residential construction boom that is gathering momentum and the major
projects planned for the city which will really boost industrial activity.
There are already more than 20,000 homes under construction, or ready to start, throughout
Brisbane and judging by the development approvals being lodged in the Brisbane Local
Government Area alone, those sorts of volumes are likely to continue for at least two years.
In addition, there will be major construction in the city when development of the Howard
Smith Wharves and Queens Wharf get under way.
Additionally, there is major construction continuing at the Gold Coast in preparation for the
Commonwealth Games, now only three years away.
.
savills.com.au/research
3
Savills Research | Brisbane Industrial
April 2015
Leasing Activity
The number of reported leasing deals for the year to March 2015 was less at 148 compared
to the 198 recorded in the previous year, however the total square metres leased was up by
more than 70,000 square metres to 485,286 square metres which is about the same level as
the five-year annual average.
Queensland is expected to outperform Sydney and Melbourne in growth of industrial
production. A lift of 4.6% is predicted this year to take output up to $58.58 billion with a
further jump of 7% expected in 2016 which will take it to $62.68 billion.
International exports from Queensland have even greater growth forecast with 11.3% rise to
$63.03 billion this year followed by a 10.4% rise in 2016 to see exports approach $70
billion.
When this sort of growth is factored in with a residential construction boom, there is good
ground to expect above average growth in industrial activity across all categories.
One of the continuing problems has been the lack of prime industrial accommodation with
all the features to allow efficient management of goods and proficiency in production. It is
good to see that is being addressed with increasing levels of new construction.
The Southside accounted for the majority of industrial stock leased in the 12 months to
March 2015 which recorded total leasing activity (excluding pre-commitments) of 233,738
square metres or 43 percent. The southside also reported the most number of leasing deals
totalling 73.
Select Brisbane Industrial Leases to March 2015
GLA (sq m)
Rent
($/sq m)
1502 Beaudesert Rd, Acacia Ridge
24,485
79 N
SPAR Australia Limited
Jul-14
Part 1439 Lytton Rd, Hemmant
15,930
130 N
Electrolux Home Products PL
Jul-14
Part 1439 Lytton Rd, Hemmant
6,048
120 N
Qld State Government
Jul-14
123 Marshall Rd, Rocklea
6,232
44 N
World Wide Logistics
Aug-14
55 Bognuda St, Bundamba
6,575
53 N
Trusscorp (Qld) Pty Ltd
Sep-14
Cnr Monash Rd, Redbank
27,781
130 N
TNT Express
Oct-14
9-122 Donaldson Rd, Rocklea
11,042
85 N
Logistics Operator
Oct-14
10 Siltstone Pl, Berrinba
9,773
100 N
Hana Express Pty Ltd
Oct-14
1,180 Holt St, Pinkenba
8,136
156 N
AP Eagers
Oct-14
49 Distribution St, Larapinta
6,090
100 N
Plasson Australia Pty Ltd
Nov-14
37 Freight St, Lytton
8,950
117 N
Yusen
Nov-14
Bldg 6, 836 Boundary Rd, Coopers Plains
5,188
105 N
Bev Chain
Dec-14
51-57 Qantas Dr, Brisbane Airport
21,912
105 N
Repco
Feb-15
11 Inghams Place, Hemmant
8,591
98 N
Burson Automotive Pty Ltd
Date
Property
Jul-14
Tenant
Source: Savills Research.
savills.com.au/research
4
Savills Research | Brisbane Industrial
April 2015
Brisbane Industrial
Metropolitan Leases by Lease Type (sq m)
Mar-05 to Mar-15
800,000
Savills identified approximately
485,286 square metres of
industrial accommodation
leased in the greater Brisbane
area in the 12 months to March
2015. This is up on the year
prior (414,413 square metres)
and up on the five year average
(483,528 square metres).
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
Direct
Source: Savills Research
Leases in the size range >
15,000 square metres
accounted for the majority of
industrial space reported
leased in the 12 months to
March 2015; 197,763 square
metres or 41 percent. However
leasing transactions in the
range < 2,000 recorded the
most number of leasing
transactions, with 103
reported.
Precommit
Sublease
Renewal
Brisbane Industrial
Metropolitan Leases by Lease Size (sq m)
Mar-05 to Mar-15
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
< 2,000
2,000 - 5,000
5,000 - 10,000
10,000 - 15,000
> 15,000
Source: Savills Research
Prime industrial rents as at
March 2015 within the
TradeCoast typically range
from $110 to $145 per square
metre per annum net face. In
comparison the southside and
northside is currently achieving
$105 to $130 per square metre
and $110 to $130 per square
metre net face.
Brisbane Industrial
Average Prime Net Face Rents by Precinct ($/sq m)
Mar-05 to Mar-15
$140
$130
$120
$110
$100
$90
$80
$70
$60
Source: Savills Research
Trade Coast
Southside
Northside
savills.com.au/research
5
Savills Research | Brisbane Industrial
April 2015
Sales Activity
Savills recorded approximately $760 million worth of reported industrial property
transactions in the 12 months to March 2015, up from $519 million in the previous year, and
up on the five year average $604 million.
Prime grade warehouse assets portraying long leases with strong covenants attracted
strong interest from a variety of investors. However, there is currently limited supply of this
style of product available for purchase.
Competition for these scarce assets has driven a tightening in yields but it has also caused
investors to look for wider opportunities such as acquiring vacant warehouses with potential
and good location then refurbishing and taking on the leasing risk and selling with a new
lease in place.
One example of this was the Harvest Property (Alceon) purchase of 45 Brandl St, Eight Mile
Plains in 2012 for $2.75 million, refurbished to high specification, fully leased and resold in
December 2014 for $5.28 million, providing a rewarding value-add opportunity.
Brisbane Industrial
Metropolitan Industrial Sales ($m and number)
Mar-05 to Mar-15
$1,200
160
140
$1,000
120
$800
100
$600
80
60
$400
40
$200
20
0
$0
Sales >$2m (LHS)
Sales No (RHS)
Source: Savills Research
Select Brisbane Industrial Investment Sales to March 2015
Date
Property
Price ($m)
GLA (sq m)
$/sq m
Yield (%)
Oct-14
30-48 Kellar St, Berrinba
8.20
4,070
2,015
8.35
Nov-14
69 Rivergate Pl, Murarrie
27.00
11,552
2,337
7.92
Nov-14
18-28 Calcium Court, Crestmead
5.30
3,311
1,601
7.20
Dec-14
Super Retail Distribution Centre, Brendale
73.84
50,300
1,468
6.70
Dec-14
136 Zillmere Rd, Boondall
25.00
15,618
1,601
9.72
Dec-14
149 Kerry Rd, Archerfield
22.172
13,774
1,610
7.79
Dec-14
7-9 French Av, Brendale
18.65
12,282
1,518
7.97
Dec-14
134 Lahr’s Rd, Ormeau
8.50
6,430
1,322
7.45
Dec-14
45 Brandl St, Eight Mile Plains
5.28
1,524
3,465
8.86
Dec-14
20 Freight St, Lytton
2.83
1,954
1,448
8.73
Feb-15
51 Musgrave Rd, Coopers Plains
10.70
9,456
1,132
8.47
Mar-15
Kingsford Smith Corporate Park, 112 Cullen
Ave, Eagle Farm
20.70
12,090
1,712
na
Source: Savills Research. na – not available
savills.com.au/research
6
Savills Research | Brisbane Industrial
April 2015
Of the sales recorded for the 12 months to March 2015, approximately 27 percent were
valued in the range $2 - $10 million with the majority of purchasers being either owner
occupier and or private investors.
The table below shows a selection of vacant possession (VP) sales transacted over the 12
months to March 2015. The apparent pick up in vacant possession purchases in recent
months appears to be driven by a lower interest rate environment and a slight improvement
in business confidence.
Select Brisbane Industrial Vacant Possession Sales to March 2015
Date
Property
Price ($m)
GLA (sq m)
$/sq m
Sep-14
190 Deakin St, Brendale
6.15
7,027
875
Sep-14
47 Business St, Yatala
6.10
5,383
1,133
Sep-14
215 Jackson Rd, Sunnybank Hills
4.23
8,885
476
Nov-14
1 Success St, Acacia Ridge
2.30
2,014
1,142
Nov-14
15 Hurricane St, Banyo
2.00
1,580
1,266
Nov-14
490 Nudgee Rd, Hendra
1.65
1,725
957
Nov-14
92 Jijaws St, Sumner
1.50
1,143
1,312
Nov-14
4/65 Riverside Place, Morningside
0.41
217
1,889
Dec-14
463 Tufnell Rd, Banyo
3.00
2,000
1,500
Jan-15
114 Gympie Rd, Strathpine
2.00
1,472
1,359
Jan-15
776 Beaudesert Rd, Coopers Plains
0.86
582
1,469
Source: Savills Research.
A list of some of Brisbane’s industrial land sales transacted over the 12 months to March
2015 is shown in the table below.
There is a dwindling supply of suitable land available for industrial development located in
close proximity to major highways and roads. There is also limited supply of existing prime
grade warehousing sized 1,000 square metres and above. Consequently, large parcels of
land and well located sites have been increasingly sought by developers.
Select Brisbane Industrial Land Sales to March 2015
Date
Property
Price ($m)
Area (sq m)
$/sq m
Mar-14
2,414 Ipswich Rd, Darra (settled Dec-14)
15.14
70,500
215
Aug-14
5 Prospect Pl, Berrinba
0.70
2,227
314
Sep-14
3 Peachey Rd, Yatala
5.78
25,590
226
Oct-14
344 Bilsen Rd, Geebung
2.73
8,139
335
Oct-14
67 Logistics Pl, Larapinta
2.40
15,850
151
Oct-14
11 Guardhouse Av, Banyo
2.00
5,395
371
Oct-14
105 Freight St, Lytton
1.93
5,385
357
Oct-14
8 Freight St, Yatala
1.175
5,738
205
Oct-14
5 Ironstone Rd, Berrinba
0.38
1,477
260
Nov-14
184 Burnside Rd, Ormeau
9.35
40,400
231
Feb-15
506 Lytton Rd, Morningside
22.50
274,900
82
Source: Savills Research.
savills.com.au/research
7
Savills Research | Brisbane Industrial
April 2015
Brisbane Industrial Land Values to March 2015
Core
Small <5,000
($/sq m)
Medium
10,000-50,000
Large
100,000+
($/sq m)
($/sq m)
Englobo
($/sq m)
North
250-350
200-300
225-275
50-75
South
225-300
200-275
200-250
40-65
Source: Savills Research
The “Fund” purchaser category was the most active in the investment market for the year
ended March 2015, purchasing 23 percent of stock reported sold. However, the owner
occupier category recorded the most transactions (28).
It is interesting to see developer purchases now comprise 17 percent of all sales by value
whereas 18 months ago the category only featured at 1%. Developers’ interest in the
market is being driven by the demand from tenants and owners who are unable to find
suitable existing stock and are now considering a design and construct (D&C) or looking at
speculative developments.
Brisbane Industrial
Metropolitan Industrial Sales Buyer Profile (%)
12 months to Mar-15
Private Investor
20%
Developer
17%
Fund
23%
Source: Savills Research
Owner Occupier
17%
Trust
14%
Government
2%
savills.com.au/research
8
Savills Research | Brisbane Industrial
There continues to be a
tightening in yields for prime
grade warehouses especially
for properties with strong
leasing covenants and access
to major arterial roads and
highways. Adding further to
tightening yields is the limited
stock of quality warehouses
sized 1,000 square metres and
above.
April 2015
Brisbane Industrial
Average Prime Market Yields by Precinct (%)
Mar-05 to Mar-15
9%
8%
Prime industrial yields as at
March 2015 are estimated to
range between 7.00 percent
and 8.00 percent in the
Southside, and between 7.25
percent and 8.00 percent in the
Northside. The average yield
for investment properties in the
southside in the quarter to
December 2014 is 7.50
percent, a 50 basis point
firming over the past year.
7%
6%
Source: Savills Research
Trade Coast
Southside
Northside
Brisbane Industrial
Average Prime Capital Values by Precinct (%)
Mar-05 to Mar-15
$2,000
$1,800
Prime industrial benchmark
ranges for each industrial
precinct are shown on the
following page. The chart to
the right tracks averages of
those benchmark ranges.
Warehouse sales across all
precincts over the past 12
months averaged a capital
value of $1,545 per square
metre.
By precinct, the TradeCoast
recorded the highest average
capital value at $1,624 per
square metre for the 12 months
to March 2015, marginally
higher than the Southside
which averaged $1,600 over
the period
$1,600
$1,400
$1,200
$1,000
$800
$600
$400
$200
$0
Source: Savills Research
Trade Coast
Southside
Northside
savills.com.au/research
9
Savills Research | Brisbane Industrial
April 2015
Key Market Indicators – March 2015
Prime
Northside
Secondary
Low
High
Low
High
Rental Net Effective ($/sq m)
110
130
65
100
Yield - Market (%)
7.25
8.00
8.50
10.00
IRR (%)
9.00
9.50
10.00
11.00
20
25
15
20
1,400
1,800
750
1,250
Outgoings - Total ($/sq m)
Capital Values ($/sq m)
Land Values 3,000-5,000sq m ($/sq m)
275 – 350
Source: Savills Research.
Prime
TradeCoast
Secondary
Low
High
Low
High
Rental Net Effective ($/sq m)
110
145
90
110
Yield - Market (%)
7.00
7.75
8.25
9.50
IRR (%)
9.25
9.75
10.00
10.50
20
25
15
20
1,500
1,900
950
1,400
Outgoings - Total ($/sq m)
Capital Values ($/sq m)
Land Values 3,000-5,000sq m ($/sq m)
290 – 350
Source: Savills Research.
Prime
Southside
Secondary
Low
High
Low
High
Rental Net Effective ($/sq m)
105
130
55
90
Yield - Market (%)
7.00
8.00
8.75
9.75
IRR (%)
9.25
9.75
10.00
10.50
20
25
15
20
1,400
1,800
700
1,250
Outgoings - Total ($/sq m)
Capital Values ($/sq m)
Land Values 3,000-5,000sq m ($/sq m)
225 – 300
Source: Savills Research.
savills.com.au/research
10
Savills Research | Brisbane Industrial
April 2015
Gold Coast/Logan Corridor
Prime
Secondary
Low
High
Low
High
Rental Net Effective ($/sq m)
100
125
70
95
Yield Market (%)
7.25
8.00
9.00
9.75
IRR (%)
9.00
10.00
10.00
10.50
15
25
15
20
1,250
1,650
750
1,250
Outgoings - Total ($sq m)
Capital Value ($/sq m)
Land Value 3,000-5,000 ($/sq m)
200-280
Source: Savills Research.
Ipswich
Prime
Secondary
Low
High
Low
High
90
110
50
85
Yield - Market (%)
7.75
8.75
9.25
10.50
IRR (%)
9.25
10.50
10.00
11.00
15
20
15
20
1,100
1,400
650
1,000
Rental Net Effective ($/sq m)
Outgoings - Total ($/sq m)
Capital Values ($/sq m)
Land Values 3,000-5,000sq m ($/sq m)
175 – 230
Source: Savills Research.
Outlook
The industrial property sector has performed quite well over the past 12 months with leasing demand at five-year
average levels and property sales in the year to March 2015 the highest in seven years.
Driving this has been a ramp up in public and private non-residential construction over the past three years and now
residential construction is picking up as the non-residential winds down.
Forecasters have private housing investment growing at 11.3% and 10.4% this year and next respectively before
easing back to more sustainable levels. This together with good growth in private consumption and international
exports will drive industrial production in Queensland up by more than 10 billion or almost 18% over the next three
years, according to Deloitte Access Economics, underpinning further demand for industrial space.
It is not all good news as despite the Australian Dollar easing, manufacturing will continue in decline in output.
Queensland remains fortunate, however, with agriculture and natural resources able to drive Gross State Product.
Property sales have been boosted by not only investor demand but also owner occupiers again emerging at the
smaller end but nevertheless accounting for an increasing share of sales.
It is expected that the Brisbane market will see increasing levels of new warehouse construction over the next two to
three years in response to improving conditions.
savills.com.au/research
11
Savills Research | Brisbane Industrial
April 2015
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