Resilience of the broader industrial market and why.

The broader industrial market has remained resilient through the COVID-19 outbreak with interest still strong from purchasers for prime industrial assets with strong lease covenants as well as good locational and physical attributes. Albeit, there has been a softening of demand for secondary industrial assets with weaker lease covenants as purchasers take a more cautious approach to the security of an asset’s income. Significant emphasis is placed on a tenant’s ability to trade through and weather the downturn caused by the COVID pandemic.

Traditionally, the industrial market has been reliant on the housing, infrastructure and mining sectors with requirement for supply of equipment and materials, both imported and manufactured locally. The lockdown on interstate migration and weaker confidence has seen the housing market slow, and therefore demand for building and construction materials has decreased.  Despite this slowdown, the local industrial market has been buoyed by significant infrastructure announcements from both levels of state and federal government.

The industrial market has also seen a shift to transport and logistics due to the growth of the e-commerce sector with on-line retail sales increasing due to the COVID-19 lockdown locally and abroad. This is supported by the recent sign up of major online retailer Amazon to a 16,300m² refurbished distribution facility in the Brisbane Industrial Trade Coast region.

Overall, the market outlook for the industrial market remains cloudy due to the broader risk associated with a weakened economy due to a second wave of COVID-19 or a rise in unemployment when the Government’s Jobkeeper stimulus package runs out. However, given affordability of credit and significant support from local infrastructure projects and e-commerce, we anticipate that the local market will remain steady for prime assets with good investment fundamentals. The market for secondary assets will likely not improve until the impact of COVID-19 eases further and business confidence returns to other sectors of the economy.

Henry Brown
— Brisbane Property Valuers
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