Queensland - Market Review March 2021

With 2020 behind us, it is great to see how well the industrial sector has performed during and post Covid-19. Its resilience was a pleasant surprise. Industrial properties, especially in Queensland, thrived during this tough period compared to its retail and office market counterparts. Tenants in the sector, in most cases, did not require much landlord assistance with rental relief and many even experienced a surge in sales. Some of this was driven by the e-commerce boom during the pandemic.

Investments

But the word got out! Since late 2020 and early 2021 our office is inundated with requests for industrial leased investments. Interstate buyers, finding Queensland assets a safe bet, have added to the demand and competition between investors is driving yields sharper than ever. Contract conditions are also being drawn up very much in the seller’s favour with cash & un-conditional contracts being offered more than ever. Yields are now being seen frequently around the low 6%’s; which is still a more attractive offer than Melbourne and Sydney investments. Stock is now the issue, as there is little left for investors to choose from. Properties that had sat on the market for long periods are now seeing renewed interest and are being purchased due to a lack of options.

Leasing Market

Even though the official figures tell us that industrial vacancy rates for Brisbane are significantly higher in January 2021 than there were in January 2020, our agents are finding the leasing market to be very strong in the south and west. Much of the leasing activity happened in Q4 2020, with Q1 2021 keeping up the absorption pace. However, the inner north region is stagnant and the activity is low.

Many tenants have found that buying is a better option, adding to the unprecedented buying demand being seen. Given the historic low interest rates and the confidence in the sector are some of the reasons. Another trend that is being observed is the large number of tenants who prefer to stay in their current premises and renegotiate a new term with their landlords. Rental rates have remained quite stable.

Owner Occupiers

Owner occupiers are very present, but smaller users sub 2000sqm are the main movers. Flood free properties are being snapped up quickly. Unfortunately occupiers have to compete with investors who are forced to look at vacant premises due to the lack of leased stock. Landlords who have had a vacancy for a long period now have the ability to convert their leasing quest into an opportunity to sell at a premium.

The Covid Effect

Surprisingly, our agents find that Covid-19 is not currently a hurdle with negotiations. Our Qld government has proven its effectiveness in managing the crisis, and it looks like most businesses and investors have a relaxed attitude towards the subject. Agents are frequently the ones more concerned about rent-relief clauses being the showstopper; rather then the tenants and lessors involved in the transaction.

By Phil Levesque
FAL Property Group