Baby boomers have been the major beneficiaries of rising housing prices over the decades. That does not necessarily mean it’s a good investment decision for them to buy residential property as they near or begin retirement.
A tight labour market and sticky inflation suggests that the Reserve Bank is not about to cut the cash rate. Indeed, it’s more likely the bank will lift it again – good news for those with cash and term deposits.
Prime Brisbane asset welcome addition to Trilogy Industrial Trust
The Trilogy Industrial Property Trust has given investors another reason to invest with the acquisition of an industrial site boasting a 100 per cent occupancy rate in Brisbane’s premier industrial estate at Brendale, a suburb of the Moreton Bay Region.
The trust, which has delivered an income return, on average, of 7.63 per cent since its inception in 2017 and a total average annual return of 9.88 per cent, now has 15 properties spread across Queensland (59 per cent of the portfolio), South Australia, Victoria, and New South Wales, as well as the Northern Territory.
The current yield at 29 February was 7.1 per cent.
The Brendale complex, which came with a $29 million price tag and comprises two modern buildings with a total gross floor area (GFA) of 18,848 sq m, is fully leased to Modern Star, a major supplier of educational resources to early childcare centres and primary schools.
Trilogy’s Executive Director – Lending and Property Assets, Clinton Arentz, says: “The acquisition (settlement is on 30 May) offers strong investment fundamentals: a purchase price about six per cent below the asset’s most recent valuation and about 15 per cent below replacement cost, a long-term lease with annual rent increases and the potential for further rental growth when the current lease expires in 2029.
“In our view, and based on current market pricing, we expect that to replace the current building would be equivalent to circa $2000 per square metre, making this acquisition price attractive.” [The acquisition price based on the GFA was $1538 per sq m.]
The site has multiple uses and a strong utility value with 2120 sq m of office space, a 301 sq m showroom and two warehouses offering 10,417 sq m and 5417 sq m, respectively.
Arentz says: “It’s the ideal location. Brendale is Queensland’s premier industrial precinct, with the Moreton Bay Region boasting a highly skilled labour force of 241,000.
“The vacancy rate for properties of 3000 sq m or more in Brendale is less than one per cent, representing one of Brisbane’s northern corridor’s most desirable undersupplied markets, is only 18 kilometres from the Brisbane CBD and offers easy access to the airport, port and main arterial roads.”
That demand is strong for Brendale industrial property should not surprise. Industrial assets, including warehouses, showrooms, storage facilities and manufacturing, logistics and distribution centres, continue to benefit from a range of well-established trends and themes such as persistent growth in e-commerce, the boom in online retail and operational onshoring in a post-COVID economy.
The global real estate services firm Cushman & Wakefield’s capital markets logistics & industrial March insights notes that the Australian industrial and logistics sector is now the largest commercial property sector by value.
It forecasts that the value of the sector is set to grow by another 22 per cent over the next two years due to an increase in new stock and an increase in value of existing stock.
Arentz says Cushman & Wakefield’s forecasts regarding value growth of existing stock are particularly interesting. “They are based on both rental growth, which is widely anticipated to continue, but also from yield compression from early 2025 – making this services firm the first major commentator to start forecasting yield compression in the sector since interest rates flattened out.”
