Creating space to thrive in the Sunshine State
Our logistics demand index was developed to integrate statistics from five key demand drivers:
- Sea freight volumes;
- Population growth;
- Retail sales;
- Manufacturing activity; and
- Occupier ability to formulate a logistics demand/absorption outlook
When applying these core measurements to the logistics market in Southeast Queensland (SEQ) we can see that it continues to face heated demand. As a result, this year is expected to be a record year of new developments across the East Coast, with 2.5m sqm expected to be delivered3, Brisbane more than doubling its long-term average. Additionally, vacancy rates across the Eastern Seaboard continue to sit at record low levels of 0.6%1.
In simple terms, space is at a premium
Executive General Manager, Logistics, Tony D’Addona reports:
“We are actively speaking to our customers to gain useful insights about their business and the overall market, and what the situation is likely to look like for them in the immediate and medium-term future.
“Our customers are becoming much more proactive with many looking to renew leases or exercise options to lock in quality properties well in advance of lease expiry. With sustained demand and limited supply, it really is a case of customers locking down the best and most efficient facilities. Acting in advance of a real supply crunch makes good financial and planning sense. This is seeing Queensland perform strongly versus NSW and Victoria in terms of demand and take up of logistics space”.
What’s causing the situation?
Essentially, despite retail sales volumes declining 0.5% in Q2 (following a 0.8% contraction in Q1 2022), growth in nominal sales growth has slowed but remains positive at 3%. Slowdown in consumer spending affects different sectors in different ways: clothing and household goods have slowed, but food retailing remains resilient2.
The broader economy remains strong with June employment data showing stable low unemployment at 3.5%, a record high participation rate of 66.8%, and the overall employment trend increasing 0.2%
In short, coupled with rapid population growth and the sustained strength of the mining sector, overall business continues to be brisk, supporting demand for industrial space.
Additionally, strong demand and changes in supply chain management means that companies continue to reconfigure their supply chains and take on new space to accommodate growth. With Covid largely behind us, buoyancy will continue to push uptake in the market despite some economic headwinds for consumers, especially rising gas and electricity costs. However, inflation now appears to be moderating (down 0.6% in Q2 vs 0.7% in Q1 2023) and a pause in official cash rate rises is expected in the second half of this year as a result. Indeed, by the end of 2024 inflation is expected to be back to the top end of the target band of 2-3%.
Importantly, 53% of the remaining available space on the Eastern Seaboard is now in Brisbane (261,166 sqm), making this market of great interest to those seeking new accommodation. Unsurprisingly, despite stable rental growth in Q2 following a 6% increase in Q1, leasing activity in Q1 2023 was increased over Q4 2022 with annual take up of 1.12 million sqm, the highest across the East Coast markets for the 12 months to April 20232.
We respond to the pressure on your behalf
Recognising the impact of steady growth across SEQ, Stockland is continuing to expand our portfolio to service increased demand from the market.
For example, an extension to Yatala Distribution Centre of 19,000sqm will provide four new prominent 4,600sqm tenancies with exclusive yard areas and construction is already underway and we look forward to welcoming tenants like Gold Coast based satellite and rocket manufacturer Gilmour Space soon.
Talking to us early increases your chance of success
We’ve been helping customers meet the challenges of the fast-growing SEQ market by developing sustainable, state-of-the-art properties. We’ve secured 33,000 square metres of new tenancies across Willawong Distribution Centre Stage 3, Yatala Distribution Centre Stage 3 and Yatala Distribution Centre South.
Strategically chosen locations set up our customers for success and provide them with room to thrive. Yatala Distribution Centre, located between the Gold Coast and Brisbane, is perfect for those looking to service both markets and broader SEQ. Further, as infrastructure in Queensland expands to accommodate the upcoming Olympics and continuing population growth in SEQ, demand for well-located and connected properties will continue to increase.
Overall, the market is delivering increased capacity. Brisbane has a total development pipeline of 843,573 sqm forecast to be delivered in 2023, compared to a long term average of less than half that figure.2
Not just space. Better space.
But there’s more to a smart property decision than space or even location. Maximising efficiency with modern design is always attractive to smart investors and operators, and as technology advances and automation becomes more widespread, we’re working closely with our customers to provide greater flexibility in design and specifications. After all, better design = better productivity = better returns.
For example, growing demand and awareness for sustainability in the logistics sector has been a commitment made on behalf of our clients. We are actively targeting 5 Star Green Star certifications and incorporating features like high energy efficiency, solar power, rainwater collection, EV charging stations and green, open spaces. We currently have 12 estates targeting Green Stars across our Logistics development pipeline.
With our help, and despite tight supply constraints, our customers are taking advantage of current and future market growth and positioning themselves for future success.
Resources
*1 – CBRE, Figures, Brisbane Industrial & Logistics Q3, 2023
*2 – Australian Bureau of Statistics, Media Release July 2023
*3 – Knight Frank, Australian Industrial Review May 2023