Brisbane’s industrial market needs more supply overall, but there is one category in particular at the smaller end of the market that seems to be forgotten, with virtually no stock available, despite strong demand.

Specifically, there is a major lack of spec activity in the 1,000 sqm to 2,500 sqm gross floor area size range, with the result that there is virtually no prime stock.

Occupiers in this size range are having to settle for secondary assets given the lack of choice in prime stock, but secondary stock is also scarce, and the competition for the rare vacant facility that does come up is extremely strong.

It’s a section of the market not usually captured in reports and official figures, but anecdotally we can see there is huge demand through very strong occupier enquiry in this category, particularly for new product. It’s a huge sector of the market.

However, at the moment it is almost impossible to find anything available to fulfil occupiers’ needs in this category right across the entire Brisbane market, and even all the way down to Yatala, in the Brisbane-Gold Coast corridor.

Some developer uncertainty but demand remains strong

There is some hesitation to build stock in this space partly due to construction costs, as well as uncertainty around whether occupiers can absorb the increased pricing required to make these developments stack up.

Based on our team’s enquiry, we know there is a huge opportunity for small to medium developers looking to undertake developments in the 1,000 sqm to 2,500 sqm size range to cater for the strong demand. We feel confident that those that do take the leap and build will be rewarded.

The demand for stock has led to rent increases across both secondary and prime industrial stock in Brisbane. In some precincts this has been up to 40% year on year.

While rents have risen across the board, we believe there is still room for rental growth in the future. The ongoing shortage of supply in Brisbane’s industrial market will keep these prices strong.

The unknown factor in the future is the economic slowdown and subsequent drop off in demand for products by consumers. But we do feel that the smaller end of the market will be relatively resilient to this.

According to Knight Frank research the pace of economic growth nationally has slowed as the cash rate nears the peak level, but economic growth is forecast to remain resilient for Queensland with GSP growth of 3.2% in FY24 to be followed by 3.3% and 3.4% in the following years, according to Oxford.

Queensland employment growth has also been strong with 55,270 jobs created in the past 12 months and unemployment remaining tight at 4.1%, while the state had also recorded 2.3% annual population growth to Q1 2023, ahead of the national average of 2.2%.

Land is available to purchase for small to medium warehouse developments, with Knight Frank currently marketing HUB Heathwood in Brisbane’s south, where there are still a few smaller blocks remaining that could deliver product to suit.

What can government authorities do to help?

To address the ongoing lack of spec activity at the smaller end of the market and to help improve the availability of industrial stock in this size range in Brisbane, we believe local councils need to embrace proactive development stances.

This includes, for example, reducing the cost of infrastructure charges to encourage more development, which in turn will benefit the economy through job creation.

In the Moreton Bay Regional Council area we have seen infrastructure charges and development fees waived to encourage the private sector to build affordable housing and other projects.

If this initiative was more widespread across both residential and commercial sectors, as well as different council areas, it would encourage further development, including in the small to medium warehouse market in particular, which would help to address the undersupply.

By Mark Clifford - Partner, Head of Industrial Logistics, Queensland

Related Reading:

Growth in Adelaide’s industrial market underpinned by an ongoing demand-supply gap - Knight Frank 

Industrial rents in Australia still have further to rise, according to Knight Frank’s Australian Horizon 2024 report