1 7 The Brisbane industrial property investment market was very strong last year, with sales surpassing $1.3 billion. The market started this year with momentum, but the volume and value of sales dropped during the first half of 2022 as rising interest (long bond) rates caused investors to pause. Major recent sales of Brisbane assets included: • Sims Ltd buying a 26,000 square metre building at 69 Tingara Street, Pinkenba for almost $90 million; • Hines paid $211 million for a portfolio of four properties including 55 Brownlee Street, Pinkenba, reflecting an overall yield close to 3.5 per cent; • RF Corval bought 52 and 60 Formation Street, Wacol with a combined building area of circa 7,700 square metres for almost $16 million; and • Centennial Property Group acquired 29 Parker Street, Pinkenba for almost $16 million. In line with the Sydney and Melbourne markets, we expect yields for Brisbane industrial properties will come under pressure to start softening over the second half of 2022 as higher bond rates ratchet up investor’s cost of debt. Since 2020, 10-year bond rates have increased by 270 basis points, narrowing the spread to prime Brisbane industrial property yields to well below the long run average. Evidence suggests many investors are already factoring in higher yields on offers. But there is not a dearth of deals confirming a softening in yields yet. On our forecasts, prime yields in the benchmark South will soften by 70 basis points by mid-2025 lifting them up to an average 5.0 per cent. When combined with strongly growing rents, this suggests capital values will experience reasonable growth the next two years before stalling. Overall, we assess the weight of money chasing industrial property in Brisbane pushed yields down by an average 80 to 90 basis points in the 2022 financial year, with firming seen across both prime and secondary grades and all regions. Most of the firming occurred in the first quarter of 2022, with yields stabilising in the second quarter of as the impact of higher interest rates caused a pause. At June 2022, we estimate average prime yields stood between 4.2 per cent and 4.3 per cent across the Trade Coast, South, and North. Yields on secondary assets followed a similar pattern. Yields on secondary asset sat between 5.3 per cent and 5.4 per cent across the three major industrial regions at June 2022. Reflecting the combination of strong stated rental growth and stable yields, average prime capital values showed rapid growth through the 2022 financial year. Investment market Investment outlook 16-20 Project Street , Warwick QLD 4370 Industrial Market Monitor | 2nd Half 2022
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