During 2016 in the Southern Brisbane industrial precincts the dominant tenant leasing activity in the 5,000sqm plus warehouses has focused on design construct or speculative buildings. Notable leases that have been completed include:
The market is seeing a flight to quality with new buildings offering high internal clearances, ESFR sprinkling systems with modern corporate presentation.
The institutional developers are aggressively competing for tenants with face rents of $110/m² to $115/m² but effective rents after incentives being sub $100/m² for the new buildings.
On the south side of Brisbane there is presently just under 500,000m² of vacancy in the 5,000m² plus industrial size range. This is made up of 80% being secondary and 20% new speculative buildings. While this is around the same figure as 2015 it is 30% above the long term average.
The secondary properties vacated by tenants moving to the new buildings are proving difficult lease. Landlords of these properties are listing the properties around $95/m² to $105/m².
So while effective rents for new buildings are equating to the rentals for secondary stock, we will continue to see the flight to quality. If secondary buildings continue to be stubborn to lease we will no doubt see downward pressure on rents and an increase in incentives that the market is now expecting.
Raine & Horne Commercial Brisbane Southside & Bayside
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