Brisbane's Month in Review -November 2020

At the beginning of 2020, the Brisbane industrial market was gearing up for a strong year, with solid growth throughout 2019 giving the market a positive outlook. The reported firming yields were a reflection of limited availability of quality stock and solid purchaser demand. Coupled with low interest rates, the sector that usually flies under the radar and away from the hype was poised to capitalise on its strong underlying fundamentals.

With the outbreak of COVID-19 and subsequent lockdowns, the Brisbane industrial market, along with other market sectors, took a bit of a pause. Agents reported a lot of deals being put on hold or terminated in the months of March, April and May due to the general uncertainty at the time. However, some deals managed to buck the trend, one example of this being the sale of 25 Buchanan Road, Banyo which sold for $11.5 million in May (negotiated in early April) with an analysed yield of 6.4% and term certain of 2.67 years. This sale along with others, reflected the fact that the industrial market was transitioning back to a state of somewhat normality.

The return post lock-down has been steady with sales rates down on expectations, mainly due to the larger disparity between prime and secondary stock. Yields for prime investments have remained stable if not firmed, with investors drawn to quality locations, modern style improvements and good access to major transport routes and hubs. These assets typically achieve yields that range from 5% to 7% depending on the quality of the tenant and time remaining on the lease.

On the other hand, secondary assets are still seen to carry significant risks with long lease up periods expected. Yields for such properties have possibly softened slightly.

On the other hand, secondary assets are still seen to carry significant risks with long lease up periods expected. Yields for such properties have possibly softened slightly.

On balance, the Brisbane industrial market appears to have fared reasonably well and there appears to be a reasonable degree of market optimism that it will rebound best of the key property sectors out of the COVID-19 crisis.