Despite floods impacting a huge portion of south east Queensland, the roaring industrial property market is likely to remain strong according to a leading expert.
Head of Research at Ray White Commercial, Vanessa Rader said while the 2011 floods forced landlords to drop rents and incentivise new tenants, this time around the market is so tight that there is not likely to be the same need to attract tenants – keeping both rents and prices strong.
“With few vacancies in some SEQ markets, landlords have been more selective in their tenant selection and those needing urgent accommodation options will be faced with rental increases and non-existent incentives,” Ms Rader said.
According to Mr Rader, the 2011 floods struck at a time when the commercial market was very soft, forcing rents to fall 15 per cent, which is the opposite of where the industrial market sits today.
Ms Rader said buyers are still active across the state and so far not concerned with the impacts of the floods.
“The lack of quality stock in the marketplace and the insatiable demand to purchase has seen some turn a blind eye to the floodwaters,” she said.
“Many prospective buyers continue to request access to view assets despite the knee high flood waters, with some eager buyers requesting to be advised when waters were down to ‘gumboot height’ so they could inspect a property.”
According to Ms Rader, developing new industrial assets in the current environment is becoming more costly and that would also put pressure on tenants.
“While the market may power through, there is no doubt owners will be faced, yet again, with clean-up costs and rising premiums,” she said.
“With a shortage of trades and growing development costs this could be an expensive exercise.
“For developers and many owner-occupier builders this was already being felt – new developments had slowed and, while demand to occupy is high, the high cost to develop will likely set new benchmarks for tenants growing rents.”
Ms Rader said she expects the prospect of interest rate rises and the threat of natural disasters to lead to greater difficulty in securing funds which could filter through to the yield achievable.
“While some discount is anticipated it is unlikely that the current low rates will grow as they did in 2011 particularly if FOMO continues with some buying groups,” she said.
“A more considered approach will be needed by purchasers and banks to ensure that the increased risk is appropriately factored into values but with rents unlikely to reduce considerably this may be a difficult task.”