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Queensland’s commercial property market soars

December 12, 2022

Commercial property assets in Queensland are in hot demand, according to the Raine & Horne Commercial’s Q4 2022 edition of Commercial Insights with industrial land in some regions being snapped up for more than twice the price it commanded less than three years ago.

Owner occupiers seeking quality industrial assets for distribution-related businesses, in addition to those in food packaging and consumer goods, are driving the demand.

Industrial property has become a star performer of the commercial property sector since the pandemic, and many Raine & Horne Commercial property experts have reported investors in the sub-$5 million range were often cash buyers.

As a result, this was helping to soften the market against the impact of the successive interest rate rises.

While the rising interest rates were predicted to see yields amongst office and retail assets rise in the next 12 months, yields on industrial assets were expected to stay as they were, thanks to the combination of high demand and extremely tight supply.

Brisbane North markets forecast is promising

Trent Bruce of Commercial Brisbane North says while retail markets were generating yields on average of around 4.5-5.5%, offices 6-6.5%, industrial assets were securing yields of 5-6%.

He explains that interstate migration and a continuation of strong spending patterns by consumers suggested not much will change in the short term.

“However, if interest rates continue to rise into 2023 we expect the market will return to a more normal supply/demand situation,” he explains.

In the industrial sector, Trent notes the market was showing no sign of slowing down, with extremely low vacancy rates, growth in online shopping and the continuation of interstate migration.

“Industrial vacancies are currently below 1%, which has been caused in part by companies holding higher levels of inventory combined with an increase in storage requirements for online shopping businesses,” Trent said.

Brisbane Southside industrial market a star performer

Low supply and high demand were likely to see industrial prices buck the trend of softening yields, according to Joseph Grasso of Commercial Brisbane Southside.

Joseph says industrial and retail properties are generating yields of 5.5-6%, rising to 5.75-6.25% for office space.

Across Brisbane South, vacancy rates continue to be low, and in the industrial market, rates were  3%, rising to 6% and 8% for retail and office properties respectively.

Low supply, high consumer demand and low unemployment were driving the market, with Joseph predicting the landscape might change in the second half of 2023 but rising interest rates were currently having little impact.

Demand for regional Queensland commercial property

Small to medium warehouses available for lease were limited as owner-occupiers took advantage of low interest rates on offer, according to Peter McCann of Commercial Townsville.

As a result, prices per square metre have shifted to anywhere between $130 and $180 sqm.

“Solid sales and leasing growth in 2022 for industrial properties have seen an increase in commercial land sales,” Peter explains.

“Some industrial properties have sat dormant for years, and developers are reaping the benefits by building small industrial estates to meet demand.

“The suburb of Garbutt remains the place to be for small to medium businesses who still want to be close to the suburbs and the CBD.”

In Hervey Bay, one of the primary growth centres servicing Queensland’s Fraser Coast, commercial property sales and leasing enquiry are strong across the board, while a lack of land on the Gold Coast is driving demand.

For a copy of the Raine & Horne’s Commercial Insights Q4 2022 click here.