$1.2bn investment injection cements Brisbane on the investment radar

Brisbane, December 04, 2018 – Brisbane’s office market remains firmly on the radar for investors, attracting a $1.2 billion investment injection in the third quarter of 2018 – secondly only in terms of value to Sydney.

CBRE’s latest Office MarketView report highlights that in the three months to September 2018, $4.5 billion worth of office assets changed hands nationally, with NSW accounting for 52% of the sales activity at $2.4 billion.

Brisbane recorded the second highest level of transaction activity at $1.2 billion, followed by Melbourne with $746 million.

In Brisbane, sales activity was driven largely by offshore investors, which accounted for 83% or $975 million of the total sales transacted in Q3 2018. Australia-based investors formed the remaining balance of 17% or $206 million.

CBRE’s National Director of Capital Markets – Office, Flint Davidson said Brisbane represented a compelling opportunity for capital investment.

“Investor interest in Brisbane has increased significantly this year, with a number of new capital entrants to the market. These groups have been attracted by the improving economic and leasing fundamentals, as well as the relative value in comparison to the east coast markets of Sydney and Melbourne,” Mr Davidson said.

“It is likely that this trend will continue during the final quarter of 2018, with several major transactions in the pipeline yet to be announced.”

Year to date, prime CBD yields in Brisbane have compressed to 5.5% – down almost 60 basis points over the past year.

CBRE Associate Director, Research, Felice Spark, said the resurgence of net interstate migration to Queensland would help support growth in the office market.

“After slipping behind for four years, Queensland is now firmly ahead of Victoria in terms of interstate movement, recording a gain of 24,000 people in the year ending March 2018 – the strongest annual rise since 2007,” Ms Spark said.

On the leasing front, CBD vacancy is beginning to drop, hovering at 14.6% at July, with further falls expected.

“The combination of a thin supply pipeline and improved tenant demand suggest vacancy will ease further to sub-14% by the end of this year and sub-13% by mid2019. Expected face rental growth of 2.5% over the next 12 months combined with a slight reduction in incentives should support net effective rental growth of 3.2% over the period,” Ms Spark added.

Reflecting on the year to date, CBRE State Director of office leasing, Chris Butters, said there had been a rebalancing in market fundamentals on the back of improved occupier demand and limited new supply in the Brisbane CBD and metropolitan areas.

“More than 80% of leasing transactions undertaken this year have seen tenants move to a higher-grade asset – confirming that demand continues to be weighted by quality of premises when assessing relocation opportunities,” Mr Butters said.

“Cost still remains paramount when assessing the market, with many occupiers leasing a smaller footprint and taking advantage of efficiencies in new workplace designs. While it is undeniable that consumer sentiment is improving, there is still a distinct sense of caution when considering growth and future expansionary requirements, meaning decision making remains slow.”