Retail property in Brisbane’s north are producing yields of 5.5-7.0%; office assets are yielding 7.0-8.0%; and yields on industrial property are in the order of 6.0-7.5%, according to Trent Bruce, Managing Director, Raine & Horne Commercial Brisbane North.
Yields are expected to remain unchanged for retail assets through to 2020, office yields may soften a little further as suburban office demand remains soft and investors are generally seeking quality properties with long term leases in place. Yields on industrial property, could tighten further as the industrial sector remains buoyant and the low interest rate environment has resulted in fewer properties coming to market.
Current vacancy rates range from 7.0% on industrial assets; 10.0% for retail property and 15.0% for office space.
Trent says freestanding industrial assets continue to be the most consistent performer with strong leasing demand. However, counter-cyclical opportunities are available in both office and retail markets, where refurbishment and renovation can improve the potential to attract quality long-term tenants.
Activity in assets suitable for a medical practice or professional services is set to grow as this sector of the economy continues to perform well.
On the flipside, Trent says, “We see challenges in the market for small retail spaces outside of busy shopping centres. In recent years there has been significant growth in the number of fast food outlets replacing traditional retail, and we see this growth slowing with increased competition from home delivery food operators.
“Office assets in industrial areas also require creative and strategic marketing to attract suitable tenants. Older style industrial facilities with limited internal clearance are increasing in supply as demand for these older properties falls.”
The Brisbane North team recently secured a 6-year lease extension and $8 million sale of 27 Strathwyn Street Brendale. 229 Robinson Road Geebung sold for $7.3 million, and 600-616 Rode Road Chermside sold for $8.8 million.
Trent sums up the market saying, “While the recent interest rate reductions have provided a stimulus to the local economy, there is clear evidence that buyers are becoming very selective with a strong focus on assets with long leases to quality tenants.”
“Banks continue to be conservative in their approach to lending against commercial assets, however we are seeing an increased appetite for lending and greater flexibility in loan conditions. Overall we remain confident that price growth will continue with a tightening of yields as investors continue to seek assets with returns much higher than those on offer from banks and fund managers.”
If you are considering buying or leasing commercial property in Brisbane’s North, contact Raine & Horne Commercial Brisbane North on 07 3352 8900.