1,000 1,500 2,000 2,500 3,000 3,500 4,000 90 100 110 120 130 140 150 160 170 180 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 $/psm $/psm Values (Right axis) Net stated rents (Left axis) Forecast Demand for industrial property in Brisbane is expected to be influenced by economic growth in Queensland, particularly State Final Demand (SFD), but also drivers that were accelerated by the pandemic, which will start to dissipate. Key economic drivers come from rising interstate migration (and associated demand for goods), improving tourism and positive prospects for mining investment. Travel flows are continuing to normalise, and Queensland is set to be a major beneficiary of this with tourism exports picking up. Besides SFD, demand for industrial space will 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. Food retail spending has settled since the pandemic boosted spike in 2021 but remains an important demand driver. Going forward, growth in this sector will mirror population growth more closely. Furthermore, industrial property occupiers’ propensity to carry additional storage space for higher inventory levels will persist long term. Supply chain disruptions are likely to linger for a while this year but then should normalise. Beyond this point, the costs associated with extra storage space will trigger a rationalisation, but not back to pre-pandemic levels. The pattern of the drivers outlined above suggest the take-up of industrial property over the next 12 months will remain robust. Net absorption is expected to remain at or above 580,000 square metres per annum until the end of this year, before falling back to around 460,000 square metres towards the middle of the decade, as pandemic related drivers dissipate. Vacancy rates will remain around current low rates for another 12 months, before rising to 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 around 14% per annum across the regions before slowing in the 2025 financial year. 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 14 Southern Brisbane industrial rents and capital values Industrial Market Monitor | 1st Half 2023
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