The global economic downturn has had a significant negative  impact on the Brisbane industrial market which was booming 12 months ago, but is now experiencing slowing demand and softening yields.

International construction consultants Davis Langdon’s Industrial Index which measures the movement in construction prices associated with industrial projects Australia wide, paints a grim picture of the sector in Brisbane.

Davis  Langdon’s Brisbane director, Malcolm Butcher, said industrial rents had stagnated, but on the positive side the lack of new supply has generally prevented them from falling.

“We also believe with continued population growth, Government infrastructure investment, low interest rates and falling construction prices that the medium term outlook for the sector is positive,” he said.

Davis Langdon’s research shows that numerous industrial projects have been put on hold or shelved as investors struggle to secure development finance and that is likely to be the case in the immediate short term.

The Industrial Index shows that construction prices have leveled out from the peak period and started to decline in the latter half of 2008 with small to medium sized projects being priced very competitively as builders and sub-contractors cut their margins dramatically.

“In some cases their margins have been cut to zero simply to maintain cashflow,” said Mr Butcher.

The Davis Langdon Index showed that falling raw material prices, such as those for steel and copper, also contributed to a fall in overall construction costs in the fourth quarter of last year – down by three to four percent.

“Evidence so far in 2009 shows that prices have fallen in the first quarter, but we are expecting some recovery towards the end of the year as the Government’s stimulus package takes effect, albeit in certain trades only,” said Mr Butcher.

For further information, contact Meaghan Jones on +61 3 9933 8800 or email mjones2@davislangdon.com.au