16 The impact of rising COVID cases on the state’s economy proved to be transitory, with Queensland experiencing a relatively benign experience with COVID over recent months. Key drivers come from rising interstate migration (and associated demand for goods), positive prospects for mining investment and the shortterm construction boost from government stimulus measures. Travel flows are continuing to normalise, and Queensland is set to be a major beneficiary of this with tourism exports picking up sharply in the most recent data point. Given this, we expect growth will remain robust in the near term, positioning the Queensland economy as a top performer nationally. Demand for industrial space will also continue to be supported by the structural shift to servicing e-commerce. However, the extraordinary pace of growth that was heightened by pandemic related restrictions has already slowed and is likely to slow further as people balance spending on goods back towards services. Even so, we still expect online spending in Queensland to grow at close to double-digit pace until the middle of the decade. Like the rest of the eastern seaboard, the food retail spend increased at a rapid pace in Queensland over the 18 months to mid-2021, driving demand for industrial space. The pace of expansion has since slowed and we expect growth in food retailing moderate further, more in line with population growth. The pattern of the drivers outlined above suggest the take-up of industrial property over the next 12 to 18 months will remain robust. We forecast net absorption remain at or above 580,000 square metres pa until the end of 2023, before falling back to around 460,000 square metres towards the middle of the decade as pandemic related drivers dissipate. We expect that vacancy rates will remain around current low rates until the end of next year, before rising to around 2.4 per cent in 2025 as an increasing supply response outpaces normalising demand. The outlook for prime stated rents is for strong growth to be sustained over the next two years, at an indicative circa 10 per cent pa before slowing in the 2025 financial year, with owners winding back incentives. We anticipate rising rents will be underpinned by tight market conditions and rising pre-lease rents (driven by higher land values and construction costs impacting feasibilities) filtering through to market rents. Leasing outlook Southern Brisbane industrial rents and capital values Industrial Market Monitor | 2nd Half 2022
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