Queensland industrial market to power onwards
The South East Queensland industrial property market will continue to power forward despite the fallout from the widespread flood damage, according to a leading expert.
Ray White Commercial Head of Research Vanessa Rader believes the recent floods in Queensland are significantly different to what occurred in 2011, and that should hold the industrial market in good stead.
Ms Rader notes said that over the past 18 months there has been a significant increase in demand for industrial assets across South East Queensland, with vacancy rates at an all-time low and yields now at record lows.
These buoyant market conditions have come on the back of record-low interest rates, cash buyers and a host of second-tier lenders keen to get involved in the commercial market.
Ms Rader said smaller investors have also been fuelling the demand for industrial assets.
“We have seen more first-time buyers make their foray into commercial real estate over the last 12 months than ever before, and industrial and its wide range of price points and high occupancy has made this an attractive investment choice,” Ms Rader said.
“While these smaller buyers may be in the sub $1.5 million price range, we continue to see activity from private investors, family offices, private syndicates up to $50 million, while larger groups such as REITS, funds, developers and offshore buyers continue to aggressively compete in the upper price ranges.”
In 2011, the market was in a far weaker state said Ms Rader, with vacancy rates higher and soft demand, prompting yields to rise sharply by around 2 per cent and rents to fall by 15 per cent with incentives becoming common.
The fallout from the 2011 floods meant asset prices were subdued for 3–4 years, and higher LVRs required due to the increased risk.
In 2022, Ms Rader sees the conditions very differently with buyers still eager to acquire industrial assets.
“The lack of quality stock in the marketplace and the insatiable demand to purchase has seen some turn a blind eye to the floodwaters,” she said.
“Many prospective buyers continue to request access to view assets despite the knee-high flood waters, with some eager buyers requesting to be advised when waters were down to ’gumboot height’ so they could inspect a property.
“Tenants however will feel the pinch during this time. With few vacancies in some SEQ markets, landlords have been more selective in their tenant selection and those needing urgent accommodation options will be faced with rental increases and non-existent incentives.”