No Rate Cut for Christmas

The Reserve Bank of Australia (RBA) has maintained the cash rate at 4.35% for the ninth consecutive meeting, aligning with market expectations. However, a subtle shift in the RBA's language has led to increased speculation about a potential rate cut in early 2025 (The Australian)

In its December statement, the RBA expressed "some confidence" that inflation is returning to target, omitting previous references to the necessity of keeping policy restrictive. This change suggests a more dovish stance, with markets now pricing in a higher probability of a rate cut as early as February (Reuters).

The RBA's decision reflects a response to weaker-than-expected economic data, including subdued wage growth and a slowdown in consumption. Governor Michele Bullock noted that while the labour market remains resilient, the Board is attentive to evolving economic conditions and remains vigilant to upside risks to inflation (The Australian).

For the commercial property market, the possibility of lower interest rates could be a positive development. Lower borrowing costs would make it easier for investors and developers to finance new projects, potentially boosting demand for commercial properties. However, the current high rates have already slowed activity, as higher costs discourage investment.

If the RBA reduces rates in early 2025, it could help revive the commercial property market by improving affordability and encouraging more transactions. Still, it depends on how the economy performs in the coming months and whether inflation stays under control.

Queensland Retail and Office Sector Update

Australian retail properties have outperformed other sectors over the past year, delivering a 12-month return of 2.4%, an increase from the previous year's 1.9%. In contrast, the industrial sector saw a modest return of 0.7%, while the office sector experienced a decline of 8.6% due to high vacancy rates and a widening performance gap between premium and secondary assets.

The resilience of retail properties is attributed to their adaptability and the sustained demand for physical retail spaces, even amidst the rise of e-commerce. Conversely, the office sector's challenges stem from evolving work patterns and tenant preferences, leading to increased vacancies and a pronounced disparity between prime and secondary office spaces.

In Queensland, the retail property market has shown robust performance. Retail sales reached approximately $7.39 billion in May 2024, marking a 2.6% year-on-year increase (CBRE Australia).

However, Brisbane's retail sector faces challenges, with vacancy rates rising to 19.2% in the first half of 2024, the highest since 2018(Courier Mail).

The office sector in Queensland presents a mixed outlook. Vacancy rates have decreased to 9.5%, down from 10.5% in the previous quarter, indicating a potential recovery(NAB Business)

Nonetheless, the sector grapples with high vacancies and a significant performance gap between prime and secondary assets.

Overall, while the retail property sector in Queensland demonstrates resilience, the office sector faces ongoing challenges. Investors are advised to consider these dynamics when making investment decisions in the state's commercial property market.

Summary of This Week’s Commercial Transactions in Queensland

This week’s commercial property market in Queensland displayed robust activity across office and industrial sectors. Investors are focusing on well-leased properties, strategic locations, and assets with development potential. Key transactions included significant office sales in Moorooka and Kedron, as well as notable industrial acquisitions at Brisbane Airport and Caloundra West. Below is an overview of the week’s major transactions.

Office Transactions

Moorooka, QLD

·        Address: 915 Ipswich Road

·        Price: $3.9 million

·         Details: A two-storey, 1,032 sqm building was acquired by Allvey Property Group. The property features exposure to over 70,000 vehicles per day and secure parking for up to 14 vehicles. Deaf Connect will lease back the property until February 2025, after which Allvey plans upgrades for a single-tenant use.

Kedron, QLD

·         Address: 558 Gympie Road

·         Price: Approximately $5 million

·         Details: A two-storey, 640 sqm office building was purchased by a private entity linked to Ray White. The site features 16 car parks and currently houses multiple tenants, with plans for Ray White Chermside to occupy the first floor.

Gatton, QLD

·         Address: 13 Railway Street

·         Price: $969,000

·         Details: A 295 sqm retail banking property leased to Westpac Banking Corporation was sold. The property has been occupied by Westpac since 1990, generating an annual net income of $80,196.42 and featuring a lease term until 2026 with options for renewal.

Industrial Transactions

Brisbane Airport, QLD

·         Address: 65 & 75 Pandanus Avenue

·         Price: $20.9 million

·         Details: Alliance Airlines acquired two adjacent hangars totaling 10,190 sqm on a 24,200 sqm combined site. This strategic acquisition enhances their operational capacity at Brisbane Airport.

Caloundra West, QLD

·         Address: 3 Lynne Street

·         Price: $1.5 million

·         Details: A 525 sqm warehouse on a 1,181 sqm site was sold. The property includes high-clearance roller doors, air-conditioned office space, mezzanine storage, and redevelopment potential, making it attractive for both business use and investment.

Arana Hills, QLD

·         Address: Corner of Dawson Parade and Patrick’s Road

·         Price: $2.4 million

·         Details: A single-tenant allied health facility leased to National Dental Care was acquired. The property offers a secure seven-year lease and achieved a yield of 5.88%.

Summary

This week’s transactions highlight continued interest in Queensland’s commercial property market, particularly in office and industrial sectors. Investors are capitalising on assets with strong tenant covenants and redevelopment potential, while strategically located properties with long-term leases remain highly sought after.

For a complete list of weekly commercial transactions in Queensland, visit McGees Wrap Up | McGees Property Brisbane

Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute legal, financial, or professional advice. While we strive for accuracy, we make no guarantees regarding the completeness or timeliness of the content. Always seek independent advice before making any financial or real estate decisions. We are not liable for any loss or damages arising from your reliance on the information provided.

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