Bullish Brisbane commercial market is the strongest in 20 years

APRIL 28, 2021

March 2021 was the best month on record for some commercial property markets in Brisbane, according to Superbrand Raine & Horne Commercial.

In suburbs to the north of the CBD such as Albion, Chermside, Strathpine, Bowen Hills, Stafford, Hendra, Lawnton and Geebung the sale of commercial property went into overdrive during the first month of autumn, according to Mr Trent Bruce, Managing Director, Raine & Horne Commercial Brisbane North.

Meanwhile to the south of the city, Mr Joseph Grasso, Director of Raine & Horne Commercial Brisbane Southside said March 2021 was one of the best months in over 20 years for industrial precincts such as Rocklea, Sumner, Raceview, Loganholme, and surrounding suburbs.

Booting commercial sales success in the north

Raine & Horne Commercial Brisbane Norths’ record month included the $5.25 million sale of the iconic Big Boot site at 621 Gympie Road, Chermside. The landmark 2,663 square metre site will be developed as a three-storey medical hub, and leasing opportunities are available via pre-commitment.

Other recent significant transactions include the sale of 314 Gympie Road, Strathpine for $2,650,000. The 4,411 square metre car yard site is directly opposite the major Strathpine Shopping Centre.

The northern Brisbane commercial property heavyweight also sold 56 & 60 Basalt Street, Geebung for $2,175,000. The 2,024 square metre site offers two freestanding industrial warehouses totalling 1,250 square metres is a partially tenanted investment.

“Typically, sale transactions represent approximately 40% of activity. However, in March, more than 80% of transactions were sales, including several off-market contracts,” Mr Bruce confirmed.

Investors and owner occupiers driving Brisbane’s northern markets

Astute investors and owner occupiers taking advantage of the low interest rate environment are turbo-charging higher than normal sale volumes in Brisbane’s northern suburbs.

“Record low interest rates mean that investors have to look for alternative places to park their funds so quality assets with good tenants are in red hot demand,” Mr Bruce said.

Southside’s Mr Grasso agrees poor cash returns are driving investors to Brisbane commercial real estate. “Money in the bank is generating returns of 0.3- 0.4% if you’re lucky on a term deposit over 12 months.

“In comparison the returns that commercial property provide are very attractive, while investing in the stock market is still a volatile ride,” Mr Grasso added.

Apart from local buyers, Mr Bruce confirms more investors from Sydney and Melbourne are taking a greater interest in Brisbane’s commercial markets.

“This interest is undoubtedly a result of the current strong interstate migration to Queensland following the impact of lockdowns in the southern states.”

Commercial tenants with strong cash flow are also taking advantage of loan repayments below current rents, which is generating a surge in owner occupier activity, Mr Bruce noted.

The impact of COVID on northern city markets

Government stimulus packages and rebounding trading activity across many industry sectors has provided strong business confidence, which is driving interest in commercial property in northern Brisbane’s inner and middle ring suburbs.  

“There is evidence of business relocations from the southern states as interstate migration gathers momentum following extensive lockdowns in those jurisdictions,” Mr Bruce explained.

Meanwhile, the post-COVID recovery has created more patchy conditions for Brisbane’s northern commercial leasing markets. “The leasing market struggled to maintain momentum through the first few months of 2021 however we are still producing good results for well positioned and well-presented properties.”

In March, Raine & Horne Commercial Brisbane North negotiated a lease for a 286 square metre office/warehouse at 276 Abbotsford Road, Bowen Hills for $297 per square metre net + o/g + GST. The property is located four kilometres from the Brisbane CBD.

FOMO drives investor demand for southside warehouses

To the south of Brisbane, Mr Grasso describes the local commercial property market as “frenzied”, with warehousing, and logistics the flavour of the month with investors.

“Reflecting some residential markets around Australia, there is an element of FOMO (Fear of Missing Out) driving some investors to snap up warehouses in Brisbane’s southside,” he said.

“Investors are still buying office and retail space to the south of the city, as long as the assets are well-located and strategic.

“For example, properties housing fast-food outlets with 15-year leases are selling for yields of 3.8%. However, the preference in our patch is for industrial as it was least affected by COVID.

“Moreover, COVID has fast-tracked the online economy, which is also underpinning demand for industrial sites and warehouses.”

Consequently, since September last year, the yields for industrial warehouses have fallen by about 1% in Brisbane’s southern commercial precincts, according to Mr Grasso.  

“In April 2020, it was possible to buy industrial property in Brisbane’s southside for 6.5% Nett. Now it is closer to 5.5%.”

Fund managers active in the southside markets

Institutional investor demand in Brisbane has doubled down since the end of COVID advised Mr Grasso.

“The non-listed fund groups that have deeper pockets are making their presence felt in Brisbane’s southside markets.

“They are even playing in markets under $5 million that are usually the domain of private investors and this activity is adding to demand levels.

“It’s a sellers’ market, so the savvy investors are trying to lock up assets with off-market sales.”

For advice about commercial property markets in Brisbane’s north or for an appraisal, contact Raine & Horne Commercial Brisbane North on 07 3352 8900. For advice or an appraisal about a commercial property in Brisbane’s south, contact Raine & Horne Commercial Brisbane Southside on 07 3216 6666.