Accelerating success.

AUSTRALIA TRADECOAST INDUSTRIAL LAND SUPPLY REPORT November 2019

Freehold Land Supply in Critical Shortage Accelerating success. MAXIMISE THE POTENTIAL OF DATA

IN-DEPTH DATA At the forefront of the real estate industry, we Granular datasets covering historical understand the demand and forecast data with over 2,000 datapoints updated quarterly. for reliable and accurate data is more prevalent than ever. Our enterprising technology, Colliers Edge, offers comprehensive DETAILED property data that enables TRANSACTIONS you to delve deeper into the Australian property Individual reporting of market, using data to major transactions. become more informed and deliver enduring value. Colliers Edge is a data subscription service developed by our in- INSIGHTS house research experts, Our experienced research team who collaborate with will help you understand quarterly our National network changes, as well as broader themes of operators to drive behind each sector and market. exceptional results.

Joanne Henderson Director | Research +61 410 391 093 [email protected] colliers.com.au/colliersedge AUSTRALIA TRADECOAST LAND SUPPLY | Colliers Radar | November 2019

By Karina Salas ATC Industrial Land Supply | 606ha Research Manager | Research [email protected] FREEHOLD LEASEHOLD LAND SUPPLY LAND SUPPLY Summary 151ha of flood-free land 455ha available at the Freehold industrial land supply (outside the Port of supply in the suburbs Airport and the Port and the ) is in critical shortage, available for development with circa 151ha (1ha and above) identified as vacant and available for industrial development own a freehold basis. 231ha 224ha This represents less than 25 per cent of the estimated land available for reclaimed site supply within the ATC precinct over the medium term. immediate and at the Port medium-term providing at the Airport long-term Leasehold land supply within the ATC (located at the and the Port supply Brisbane Airport and Port of Brisbane) is estimated at 455ha, representing over 75 per cent of the land supply. 119ha of flood-free 112ha of land land supply at the supply at the Port Total land supply available for industrial development on a Brisbane Airport of Brisbane freehold and leasehold basis is estimated at circa 606ha. Circa 381ha (or about 60 per cent of the total estimated land supply) of vacant industrial-zoned land is available for ATC Economic Contribution Leader of import trading value in the state immediate and medium-term development. Circa $2 billion air and road transport infrastructure investment Precinct in need of dedicated rail transport connectivity Industrial land supply at the Brisbane Airport has been strategically staged in response to demand levels. The Brisbane Airport offers circa 12ha of construction-ready industrial-zoned land at Export Park. The Airport Industrial This analysis assumes that the land supply available at the Airport and Park offers the largest industrial land supply available of the Port is most likely being released to the market on a leasehold basis. 107ha for release between 2020 to 2030. In order to forecast the demand for vacant industrial-zoned land and assess the extent of the current supply, this analysis has identified the The Port of Brisbane offers 112h of land available for take up of land within the ATC from 2016 to 2018. For the purpose industrial expansion and 224ha of reclaimed land in of this analysis, take up of land is defined as an industrial-zoned land Fisherman Island, being the main location for long-term developed or occupied in any form (including containers and sites industrial expansion (most likely on a leasehold basis) under construction) over the assessed period. within the ATC.

Current road and air infrastructure investment of circa $2 Global hub underpining billion supports the precinct’s growth potential and would economic internationalisation provide a competitive advantage for logistic operators. The ATC region is an international trading hub, extending over However, dedicated rail connectivity to the precinct 8,000ha on the bank of the . It is considered a global is crucial to provide competitive access to industrial precinct due to the significant trading and economic activity, the operators located outside the ATC. world-class infrastructure on offer, its global accessibility and its Purpose of study and capacity to compete at an internationally-significant level. The ATC includes 2,700ha of land allocated to the Brisbane Airport assumptions and 1,860ha of wet and dry land allocated to the Port of Brisbane. Colliers International has undertaken an investigation on the Australia According to data publicly available through the Brisbane Marketing 1 TradeCoast’s (ATC) vacant industrial-zoned land to assess the extent website, the ATC is comprised of 32 industrial precincts offering and location of industrial land supply available. The analysis quantifies freehold and leasehold opportunities for low, medium and high the amount of vacant land (1ha and above) zoned as industrial or impact industries and mixed-used purposes. The ATC is also a solid industry investigation, free of flooding constraints (with the exception economic contributor, employing over 60,000 people spread across of the Port of Brisbane) and available for industrial development. 1,500 businesses.

For the purpose of this analysis, the suburbs within the boundaries The ATC contribution to the economy is forecast to of the ATC precinct are Brisbane Airport (the Airport), Eagle Farm, reach $9.4 billion by 2026, which is equivalent to 2.1 per cent of the Fisherman Island, Hamilton, Hemmant, Hendra, Lytton, Morningside, forecast Gross State Product (of $434 billion by 2026). The number Murarrie, Pinkenba, Port of Brisbane (the Port), Tingalpa and of employees is also forecast to increase to 110,000 by 2026, Wakerley. representing an increase of 83 per cent.

1Brisbane Marketing is Brisbane’s economic development board.

3 AUSTRALIA TRADECOAST LAND SUPPLY | Colliers Radar | November 2019

Key advantages within the precinct include: A recent report prepared by Deloitte Access Economics and commissioned by the Port of Brisbane revealed that a dedicated • Strategic location for global industrial operators looking for easy freight rail connection to the Port could create an additional $820 accessibility to one of Australia’s fastest growing container ports million in economic and community benefits, while also taking 2.4 (the Port of Brisbane) and the largest capital city airport (the million trucks off the city roads. Brisbane Airport). • Located 6-20km from the Brisbane CBD in a centralised The State and Federal Governments are currently funding a joint location within South East Queensland and offering flexible study to look at the feasibility of this project. The findings of the study town planning schemes supporting industrial development. are scheduled for release this year. Infrastructure Australia considers this project a high priority initiative reflecting its significance. • Closest eastern capital city port to Asia, which is up to five sailing days closer than the ports of Sydney and Melbourne. Colliers International maintains the view that this government support • Direct access to more than 30 international and domestic is critical to maintaining the competitiveness of the international airlines via the Brisbane Airport and over 40 shipping lines trading activity in South East Queensland. The scarcity of freehold servicing the Port of Brisbane, with business activity operating land available within the ATC displaces industrial operators needing 24/7. access to international markets, hence there is a need to improve connectivity between the other industrial precincts in South East Solid investment in road and air Queensland. infrastructure The ATC is a global trading precinct supporting 20 per cent of the export value and nearly 85 per cent of the import value in Queensland. Considering the precinct’s contribution to the state’s economy and its growth potential, investment in air and road infrastructure projects in the range of $2 billion are under construction within the precinct. 1. $1.3 billion new Airport Runway The Airport’s new runway is the largest aviation project currently under construction in Australia. It is funded by Brisbane Airport Corporation, an unlisted private-sector company.

This project is expected to reach practical completion by mid-2020, providing the most efficient runway system in the country and doubling the airport capacity to support passenger and cargo growth. 2. $650 million Kingsford Smith Drive upgrade The project entails widening the road from four to six lanes and road improvement works along different areas on Kingsford Smith Drive. This project is forecast to increase the road capacity to accommodate future traffic volumes and reduce traffic congestion saving up to 30 per cent in commute time. Lendlease is building the project, with completion scheduled for 2020. Dedicated rail connectivity is critical to support competitive international trading activity Freight through the Port has increased at a compound annual rate of 4 per cent over the past five years, from 1.1 million twenty-foot equivalent units (TEUs) in June 2014 to 1.3 million TEUs in June 2019. According to the Port of Brisbane 2018 Master Plan, the Port forecasts to handle up to 4.8 million containers by 2048.

Based on these projections, dedicated freight rail infrastructure connecting the Port with the rest of Queensland and Australia is a necessity to efficiently handle the freight growth, maintain the precinct’s productivity levels and mitigate the risk of reducing liveability in surrounding areas.

4 AUSTRALIA TRADECOAST LAND SUPPLY | Colliers Radar | November 2019 Staging release of industrial • Circa 12ha of land or the equivalent to 10 per cent of vacant industrial land within the Airport is ready to build on and located land supply at the Brisbane within the Export Park. Airport • Circa 107ha or the equivalent to 90 per cent of the vacant industrial land within the Airport is located at the Airport The Brisbane Airport is the largest airport in Australia by land Industrial Park and scheduled for staged release between 2020 size, extending over 2,700ha. Its contribution to the Queensland and 2030. Circa 24ha are currently under construction and due economy is currently estimated at $4 billion, underpinned by for release in 2020. 425 businesses and employing over 23,000 people, with this contribution expected to double by 2040. The current industrial facilities leased to industrial-occupiers within the Airport include 29 buildings providing 207,788sqm lettable area. The airport-freight cargo operations connect to over 30 According to the 2020 Brisbane Airport Preliminary Master Plan, international destinations, accommodate to ad-hoc international they are aiming to construct circa 191,000sqm of industrial Gross freighters, and 24/7 operational capacity that is significantly less Floor Area (GFA) over the next five years, creating about 1,980 jobs. congested than other major Australian airports. This would represent an increase of more than 90 per cent of the According to the Statistician’s Office, the current industrial GFA within the Airport. value of commodity export activity through the Brisbane Airport has more than doubled, from $1.2 billion in June 2009 to $2.9 Port of Brisbane’s land supply billion in June 2019. Over the year to June 2019, the commodity export volumes increased circa 6 per cent, from 72,960 tonnes has potential to grow over the in June 2018 to 77,261 tonnes in June 2019. This represented an long term annual increase of circa 19 per cent in the value of airfreight export The Port of Brisbane extends over 1,860ha of wet and dry land, activity to circa $2.9 billion. Similarly, the airfreight import volumes allocated for industrial, commercial and open space purposes. The increased 7 per cent, from 49,117 tonnes in June 2018 to 52,628 diversified cargo port handles around 450 commodities and is tonnes in June this year. rising as a strategic logistic location in Australia. This is due to the The $1.3 billion runway development is expected to double the associated inbound logistics benefits, that include reduced travel airport capacity and further support an increase on international time, increased road mass allowance and more efficient vehicle cycle trade activity. time management.

Circa 500ha or about 19 per cent of the Airport’s land holdings are In the case of outbound logistics activities, line haul costs from available for future development for industrial, commercial, retail or Brisbane to Sydney are estimated to be up to 50 per cent cheaper specialised purposes. The land supply is expected to be offered on compared to line haul costs from Sydney to Brisbane. a leasehold basis and has been strategically staged in response to Over 70 businesses currently hold operations at the Port, handling demand levels. circa $50 billion in trade on an annual basis. The Port provides Colliers International has sourced the following details from the adequate storage space for short and long-term needs, allowing Brisbane Airport Corporation. mass management and large payloads. They facilitate industrial design and development with an efficient approval process. • The Brisbane Airport contributes circa 119ha (the equivalent to circa 20 per cent of land supply within the ATC), with all sites The Port trades about 10 per cent of the state’s total throughput, zoned General Industry. with circa 34 million tonnes for the year to June 2019. According to the 2018 Port of Brisbane Master Plan, the Port forecasts an annual compound growth in TEUs of about 4.3 per cent over the next 30 years, from 1.34 million TEU in June 2018 to 4.8 million TEU in June 2048. This suggests the need for future industrial land supply. Brisbane Airport - Industrial Land Supply Releases The Port of Brisbane has identified 230ha of reclaimed area located

90 83 at Fisherman Island, which will be gradually filled over the next 40 80 years. This is one of the largest reclamation activities in the southern 70 hemisphere. Based on information available through the Port’s media 60 s

e releases, the reclaimed area available is currently 224ha.

r 50 a t

c 40 e

h Based on the publicly available data, circa 112ha of vacant land is 30 24 20 12 available for current and medium-term industrial expansion on a 10 leasehold basis. A total of 336ha of land would be available at the - Available Now 2020 2023 to 2030 Port taking into account the reclaimed land supply at Fisherman Export Park Airport Industrial Park Island.

Source: Brisbane Airport Corporation and Colliers International

5 AUSTRALIA TRADECOAST LAND SUPPLY | Colliers Radar | November 2019

1. Port West Precinct There is circa 6ha of vacant land available for industrial development. This precinct’s parcel sizes are currently larger than tenants’ The precinct offers 85ha of largely vacant port land along the general requirements, and are currently under review with a view to riverfront at Lytton. The estate is divided into two areas, upstream accommodating additional development. Stage 1 offering 50ha of land and downstream Stage 2 offering circa 35ha of land. The Master Plan has identified an additional 470ha of vacant land for development in the long term. This area has not been analysed due Circa 66ha of vacant land is available within the precinct for to expectations it will not be developed in the next 20 years. development or industrial operations. The precinct will attract a mixture of trade-related warehousing and distribution centres. Historical industrial land take 2. Port North Precinct The precinct offers 69ha of core port land, with circa 27ha remaining up concentrated in Lytton and vacant and available for industrial development. The precinct Pinkenba accommodates various operators in different industries including An analysis of take up within the ATC revealed that circa 75ha of land warehousing, assembly operations and manufacturing operators. above 1ha was taken up from 2016 to 2018. The annual take up of 3. Port Bris Precinct 25ha has been assumed as the base case scenario.

The precinct is the primary location of port operations. Circa 13ha of For the purpose of this analysis, we have assumed that the annual vacant land are available for development. take up could increase to 40ha a year (or about 60 per cent) under 4. Port Gate Precinct the high case scenario. The precinct offers 85ha of dry land and 40ha of wet land and is the main location for special industries operating particularly hazardous facilities.

Port of Brisbane Land Supply by Precinct ATC’s Historical Land Take Up

35 250 224 30 200 25

150

s s 20

s

re

re

a

a ct 15 ct 100 e

e

h

H 10 50 27 31 35 6 13 5 0 0 Available Now Medium-term Long-term 2016 2017 2018 Port Gate Port Bris Port North Port West Fisherman Island - Reclaimed Annual Take up Annual Average Take up

Source: Colliers International Source: Colliers International

6 AUSTRALIA TRADECOAST LAND SUPPLY | Colliers Radar | November 2019 Vacant industrial-zoned land Available vacant industrial-zoned offered on a freehold basis in land beyond 2030 short supply To determine the demand for vacant industrial-zoned land sized 1ha or above, the historical average land take up rate of 25ha a year has This analysis has been completed using data downloaded from the been assumed. The annual average is assessed as the base case. Brisbane City Council, the Department of Natural Resources, Mining and A high case of 40ha of land take up has been used to account for Energy and Corelogic via the ArcGIS software. We have also completed increased potential take up speed. a visual identification of vacant land using the MetroMap software. The key findings of the analysis are explained below: The key findings of the analysis are explained below: • Circa 75 per cent of the available land supply could be offered • Circa 1,547ha of flood-free, industrial-zoned land exists within as leasehold development opportunity. the ATC allowing for a well-diversified mixture of low, medium • Less than 25 per cent of the available land could be offered as and high impact industry. freehold development opportunity. • Circa 151ha (10%) of flood-free industrial-zoned sites (1ha and • Excluding the reclaimed land at the Port, about 40 per cent of above) are available for development. the available land is freehold opportunity, with the balance 60 • Pinkenba and Murarrie are the main locations for industrial per cent being leasehold opportunity spread equally between operations outside the Airport and the Port, offering a total of the Airport and the Port. 875ha of flood-free industrial-zoned sites. • The reclaimed land at the Port would triple the offering to a total • Pinkenba is the main location for future industrial developments of 336ha of developable industrial land. in the ATC, with circa 45ha of developable industrial-zoned land. In summary, of the land supply available for industrial development • Circa 54ha of vacant industrial-zoned land (above 1ha) is in the next 15 to 24 years, more than 75 per cent of the land supply currently affected by flooding, potentially having restricting would be offered on a leasehold basis. development opportunity, hence it is excluded from this analysis. • Circa 41 per cent of vacant industrial-zoned land has a Vacant Industrial-Zoned Land at ATC classification of IN3 (General Industry C), allowing for a mixture Scenario Analysis Base Case High Case of low, medium and high impact industry. Total take-up 2016 to 2018 (ha) 75 75 • Murarrie and Hemmant are the preferred locations for Average annual take up (ha) 25 40 high-impact industrial development, providing 43ha of land with Total vacant industrial-zoned land including 605 605 a zoning classification of IN3. reclaimed land (ha) • Property developers or investors own circa 60 per cent of the Total vacant industrial-zoned land excluding 381 381 reclaimed land (ha) flood-free vacant industrial-zoned land, with the public sector owning 22 per cent and the balance owned by owner-occupiers. Port of Brisbane - Leasehold 112 112 Brisbane Airport - Leasehold 119 119 Based on our analysis, less than 25 per cent of the vacant land Suburbs - Freehold 151 151 (1ha or above) within the ATC could be made available for future Reclaimed Land at the Port of Brisbane - 224 224 development under freehold conditions. Leasehold

Total vacant industrial-zoned land in years 24 15 including reclamation

Supply available until year (including reclamation) 2042 2033

Source: Colliers International

Share of Vacant Industrial- Freehold Land within the ATC Share of Industrial- Zoned Land at the ATC (%) (ha, %)

18% 22 , 14% 11 , 7% 37% 20% 57, 38% 61 , 41% 25%

Port of Brisbane - Leasehold General Industry A General Industry B Brisbane Airport - Leasehold Suburbs - Freehold General Industry C Industry Investigation Reclaimed Land at the Port of Brisbane - Leasehold

Source: Colliers International Source: Colliers International

7 AUSTRALIA TRADECOAST LAND SUPPLY | Colliers Radar | November 2019

ATC’S Estimated Vacant Industrial-Zoned Land (excluding the Port and the Airport)

Brisbane Eagle Farm Hemmant Lytton Morningside Murarrie Pinkenba Tingalpa Wakerley Grand Total Airport General Industry A - - - - 3 - 4 - 3 11

General Industry B 9 22 0 1 12 1 12 - - 57

General Industry C - - 19 3 - 24 15 - - 61

Industry Investigation - - 0 6 - - 13 2 - 22

Grand Total 9 22 19 10 15 26 45 2 3 151

Source: Colliers International, Brisbane City Council and the Department of Natural Resources, Mininng and Energy Outlook sectors (especially corporate occupiers looking at long-term warehousing, container parks and airfreight facilities). This puts Over the past five years, the ATC experienced the strongest growth further pressure on the already diminishing freehold land supply. in average land values in the Brisbane industrial market, increasing by 51 per cent (or annual compound growth of 8.6 per cent) to an The demand for freehold land opportunities does provide another average price of $415/sqm in September 2019 (from $275/sqm compelling argument for the construction of a dedicated freight in September 2014). The historical growth has positioned the ATC rail connection to the Port. As such, the Government needs to as the most expensive location for capital investors and owner- support competitive international trading activity in the South East occupiers in the South East Queensland industrial market. Queensland. Currently, it is not viable for the Port operators to utilise inland rail as it stops 38km from the Port. ATC’s land values are likely to continue to experience moderate to solid growth over the years ahead supported by the forecast Leasing activity within the precinct is forecast to remain solid, with population growth in South East Queensland and the limited the ATC expected to remain the most expensive location for tenants, industrial-zoned land available for future development on a freehold reporting average prime net face rents of $118/sqm compared to basis. We anticipate this trend will continue to support increasing Brisbane offering average prime net face rents in the range of $103 capital values within the precinct. to $111/sqm in different locations. Our analysis suggests further upward pressure could be applied to these occupation costs, with Freehold land is in severe short supply with an estimation of 151ha of a lack of available freehold land having the potential to increase industrial-zoned land available for future development on a freehold demand from occupiers considering new facilities in the ATC. basis (representing less than 25 per cent of supply). Leasehold land availability, on the other hand, shows relatively good supply of up The analysis reveals that long-term availability of land supply could to 455ha over the long term, representing 75 per cent of the land potentially be concentrated to the reclaimed area of 224ha at the available for industrial development. Port, increasing the long-term land supply by 60 per cent.

Whilst the Federal and State Governments retain ownership of the Whilst our analysis does highlight the potential supply over the long land at the Airport and the Port, the leasehold tenure inhibits direct term, there are fundamental design, capital and time constraints due investment by industrial operators or external investment vehicles. to underlying geotechnical impacts that require consideration.

Whilst the Brisbane Airport Corporation and Port of Brisbane have Based on historical take up rates, the ATC has industrial-zoned land proved to be highly capable and competitive industrial developers, supply (leasehold and freehold) to at least 2033, but it could be they seem to be able to primarily offer a solution to specific market extended to approximately 2042.

8 Maximise The Potential Of Your Property STRATEGIC ADVISORY

CAPITAL MARKETS

RESEARCH INVESTMENT SERVICES

VALUATIONS & ADVISORY REAL ESTATE MANAGEMENT

OCCUPIER SERVICES PROJECT LEADERS

LEASING

Offering a team of experts across every asset class and every service, we invest in relationships to create enduring value. When it comes to delivering this value for your property, collaboration is key. Our team of industry leaders work together to drive exceptional results.

OUR RESEARCH EXPERTS

Anneke Thompson Chris Dibble Alex Pham Joanne Henderson Head of Research Director Director Director Australia NZ Research & NSW and National Retail Colliers Edge +61 412 581 647 Communications Research +61 410 391 093 +64 9 357 8638 +61 433 779 984

Karina Salas Sarah Walker Kate Gray Quyen Quach Manager Manager Director Associate Director QLD Research VIC Research SA Research WA Research +61 7 3908 9961 +61 3 9612 8867 +61 401 610 766 +61 9261 6672

Adrianna Kazzi John Nicolopoulos Database Analyst Manager +61 2 9770 3229 National Residential Research +61 3 9940 7213

Colliers International does not give any warranty in relation to the accuracy of the information contained in this report. If you intend to rely upon the information contained herein, you must take note that the information, figures and projections have been provided by various www.colliers.com.au sources and have not been verified by us. We have no belief one way or the other in relation www.colliers.co.nz to the accuracy of such information, figures and projections. Colliers International will not be liable for any loss or damage resulting from any statement, figure, calculation or any other information that you rely upon that is contained in the material. © Colliers International 2019. Accelerating success.