"1RENT REVIEW 1&2, Lot 7 459 Tufnell Road, Banyo.USB242 – Experience Property Kiarne Tillyer- Lordi – N9456830 9/10/2017Word Count:2480 including in-text referencing and referencesUSB242- Assessment TwoQueensland University of Technology Kiarne Tillyer-LordiN9456830 2CONTENTS PAGE Summary …………………………………………………………………….. 3 Subject Property ……………………………………………………………..4 Location ………………………………………………………………….4 Building Description……………………………………………………..4 Land Description ………………………………………………………..5Town Planning …………………………………………………………..5Market Information …………………………………………………………..6 General Economic Conditions …………………………………………6 Market Conditions ……………………………………………………….7Brisbane Industrial Area…...………………………………………....7Market Competition …………………………………………………..8Lease Comparisons……………………………………………………………9-13Final Lease Rental Figure …………………………………………………..... 14References …………………………………………………………………… 15-16USB242- Assessment TwoQueensland University of Technology Kiarne Tillyer-LordiN9456830 3SUMMARYProperty Address1& 2 Lot 7 459 Tufnell Road Banyo QLD 4014 Lot Details RPD - Lot 2/SP219017 ZoningCP-EC: Emerging Community Area Property DescriptionIndustrial Warehouse/Office Accommodation th Date of Rent Review13 of September 2017 2 Assessed Annual Gross Rent$243/m Lease Term5 years 2 2Leasable TermB1 -1,703m B2- 922mMarket CommentsThe industrial market in Brisbane is showing growth with strong investment activity creating a decrease in vacancy and tightening in yields despite the increase in demand creating a shortage in supply.Incentive9.3% 2 Effective Rent$220/m Rent Review ByKiarne Tillyer-Lordi USB242- Assessment TwoQueensland University of Technology Kiarne Tillyer-LordiN9456830 4SUBJECT PROPERTY LOCATION The Subject Property 1& 2, lot 7 459 Tufnell Road, Banyo is located within theNorthlink industrial precinct in the Northern suburbs of Brisbane. The location of theproperty is approximately 16.3km North-East from Brisbane CBD, 6.9km North-Westof the Brisbane Airport and 23km West of the Port of Brisbane. The property hasaccess to the Gateway Motorway via Nudgee Road, which is approximately 1.6kmaway. The site is located at the end of an access driveway with no street exposure offTufnell Road. Tufnell Road itself is positioned amongst a variety of residential,commercial and industrial sites between Toombul, Nudgee and Vicents Road. Also,in close proximity is public transport: Banyo railway station is situated 1.5km from thesite and a bus station is located at the front of the Northlink precinct, Tufnell Road.Issues that may arise pertinent to the subject property include flooding andcontaminated land. As illustrated in Figure 1, lot 2 is at a low risk of floodingcompared to lot 1. Lot 1 may receive potential flooding due to overland flow whichmay be caused by excess run-off during high rainfall to low lying areas. Lot 1 also asthe water corridor which is situated at the rear of the building which may causerestriction to build or extend. Also, the suburb has shown high risk of potential andactual acid sulphate soil which may be a result of the land being below or measuredat 5m. The suburb Banyo has also be recognised as an area with criticalinfrastructure and movement. (Brisbane City Council,2017) Figure 1 Map (Brisbane City Council) BUILDING DESCRIPTION The subject property includes two buildings which accommodates a warehouse andtwo-storey office space which was completed in 2009. The medium sized industrialbuilding which has been renovated has been constructed with tilt-up concretepanels, rendered concrete, tinted glass panels for external walls with a steel sheetingroofing. (RPD,2017)USB242- Assessment TwoQueensland University of Technology Kiarne Tillyer-LordiN9456830 5LAND DESCRIPTION The subject property is positioned on rectangular shape site, with the driveway beingsituated at the South-Eastern corner. The land is mainly flat which aligns the roadheight with the site however, the property does have an easement, irregular inshape, on the South-Western side. 5,365m² (RPD,2017)Figure 2 Lot 2 (PriceFinder)Figure 3 Lot 1 (PriceFinder)TOWN PLANNING Local Authority:Brisbane City Council Plaining Scheme:City Plan 2014Local Plan: Banyo Nudgee neighbourhood plan Zoning: Emerging Community Area (CP-EC) Ward: NorthgateThe subject property zoning area is recognised as an emerging community area(CP-EC) implemented by the Brisbane City Council for a variety of reasons that aimto improve and shape the future of Brisbane city. One of the main reasons behindthe code was to identify appropriate land for urban purposes and identifying suitableland that can be preserved for future urban development.Figure 4 Zoning (Brisbane City Council) USB242- Assessment TwoQueensland University of Technology Kiarne Tillyer-LordiN9456830 6MARKET INFORMATION GENERAL ECONOMIC CONDITIONS The Australian GPD Growth Rate has shown a strong outcome throughout thesecond quarter of 2017, expanding by 0.8% in growth compared to the first quarterthat was 0.3%. This outcome was mainly achieved by the solid support and strengthin domestic demand and net exports. The economy grew by 1.8% in the secondquarter, succeeding a 1.7 percent expansion in the previous quarter. (TradingEconomics,2017) Despite the positive economic growth, the economy mayexperience a small decline as wage growth is stagnant, the housing market begins tosoften and prices begin to drop in iron ore, coal and oil as well as China’s slowergrowth could lower export revenues. (Trading Economics, 2017) Figure 5 Australian GDP Growth (Trading Economics)Since the end of 2016 to October 2017 Australian cash rate has been held at asteady 1.5% as it aims to entice consumer demand across the market. (TradingEconomics,2017). Inflation throughout the year has fallen, the June quarter was1.9% compared to the first quarter at 2.1%, resulting in a decrease of -1.3%. Thedecrease may be a result from the slowdown in costs of housing and transport(Trading Economics,2017) Figure 6 Cash Rate (RBA) Figure 7 Inflation Rates (ABS)USB242- Assessment TwoQueensland University of Technology Kiarne Tillyer-LordiN9456830 7MARKET CONDITIONS BRISBANE’S INDUSTRIAL AREA The industrial area is a growing sector in the property market, showing a positiveoutlook to employment opportunities and an increase in demand due to significantprojects which aim to commence in 2017. (Savills,2017)Colliers International has indicated significant leasing activity in the industrial marketin Brisbane throughout the first half of 2017. The TradeCoast region showing over100,000sqm of leasing transaction and 5000sqm and above in warehouses. North ofBrisbane and Outer North industrial precincts has also shown potential growth due toits affordability, access to major exports, and being surrounded by commercial, retailand residential developments.Gross Rent and Incentives Since late 2015 to late 2016, the market for prime face rent had been fluctuating2 2 between $104/m and $105/m . However, we have begun to witness significantimprovement in the first half of 2017 with Brisbane average prime net rental now2 currently at $109/m , representing a 4.4% of annual growth. The average incentive2 level has also dropped from 13% to 11.8% resulting in an effective rent of $96/m .This represents a growth of 5.9% over the past 12 months. (ColliersInternational,2017) The secondary market has also experienced an improvement in2 the leasing activity, with average gross rent sitting at $87/m at the end of July 2017.This shows an increase of 3.1% in the last 12 months as well as incentives leveldecreasing, averaging to 13.2% however are still higher than previous year.(ColliersInternational,2017) Figure 8: Gross Rate, Incentives and Yields YieldsThe investment activity throughout 2017 has remained steady and has seen yieldstightening due to investors seeking core products in the industrial sector. This isexpected to continue well into 2018. However, due to the major increase in demand,supplies have begun to tighten creating an increase in land values. (ColliersInternational,2017)USB242- Assessment TwoQueensland University of Technology Kiarne Tillyer-LordiN9456830 8Vacancy RateDriven by the prime market, the industrial sector has witnessed a sharp decline invacant space, now 24% lower over the course of 2017 - dropping the vacancy space2 to 565,905m . (Knight Frank,2017) Improvements were mainly accomplished by the2 prime market, which fell by 19% in the second quarter to 25,860m whereas the2 secondary market vacancy increased by 6% to 33,600m . (Knight Frank,2017)Figure 9: Vacancy RateMARKET COMPETITION Eagle Farm is near the CBD, domestic and international airports. It’s positioned in aone of the most sought after industrial suburbs in Brisbane. Any industrial primeproperties that goes on the market is competition as it is recognised a great locationfor businesses that are wanting to move out of the city for more affordable rent. 4Chapman Place Eagle Farm is a modern, functional industrial property withoffice/warehouse space. High quality features for example a column free warehousewhich is an attractive view to renters or potential buyers. It also offers a greatincentive to draw people in resulting as a potential market competitor and any otherprime industrial properties in the northern precinct. USB242- Assessment TwoQueensland University of Technology Kiarne Tillyer-LordiN9456830 9LEASE COMPARISONS PROPERTY ONE:4 CHAPMAN PLACE EAGLE FARMth Date Lease Commenced17 of AugustAnnual Gross Rent2 Total: $ 215,000/m 2Office:$41,250 /m 2Warehouse: $172,500/m Lease Term3 Years Leasable AreaTotal: 1,650 sqmOffice:150sqm Warehouse: 1,500 sqmIncentive3 months net free rent Annual ReviewCPI annual increase or 3.50% DescriptionFreestanding,single level office space, modern tilt panel office/warehouse facility with a column free warehouse space. Good standard for area with open space carpark and washbay.Comparison to Subject Property Compared to subject property, the site is a standalone building, has smaller leasable areaand carpark space. However, is modern, hashigh quality fittings/ fixtures with high standard construction. USB242- Assessment TwoQueensland University of Technology Kiarne Tillyer-LordiN9456830 10POPERTY TWO: 11/62 CROCKFORD STREET NORTHGATE th Date Lease Commenced17 of JulyAnnual Gross Rent2 Total: $221,000/m 2Office:$50,000/m 2Warehouse: $172,500/m Lease Term5+5+5 Years Leasable AreaTotal: 1,700sqmOffice:200sqm Warehouse: 1,500 sqmIncentive Comprises a leasing pre-commitment for a newly constructed industrial building. Annual ReviewCPI annual increase DescriptionModern style, industrial warehouse/officefacility with concrete tilt panel construction. Has a Mezzanine storage, electric roller doors amenities and washbay with plenty of parkingspace.Comparison to Subject Property Small leasable area, majority warehousespace for storage. Finish to a similar standardto the subject property. Smaller carparkarea, onsite washbay and amenities. USB242- Assessment TwoQueensland University of Technology Kiarne Tillyer-LordiN9456830 "