McGees Wrap Up – 19 December 2025

Queensland Commercial Property Weekly Wrap-Up

Week Ending 19 December 2025

The Queensland commercial property market is concluding the year with a definitive pivot toward "de-risked" essential services and income-secure assets. This week’s activity, highlighted by Dexus’s landmark play in Chermside and record-breaking industrial results in Mackay, underscores a flight to quality as investors seek to hedge against persistent construction cost volatility (Wilmot, 2025). While institutional appetite for neighbourhood retail remains robust, the development sector is facing a "productivity squeeze," with construction costs in regional hubs like Townsville having surged 42.5% over the last five years. Consequently, capital is increasingly targeting "ready-to-go" sites with existing approvals, as seen in the Rothwell aged care transaction, or premium assets with long-term tenure in resource-backed corridors (Herde, 2025a; Smith, 2025).

Retail – Westfield Chermside Stake Acquisition

Address:
Gympie Rd, Chermside

Property group Dexus has significantly increased its exposure to Brisbane’s retail sector, acquiring an additional 25 per cent stake in Westfield Chermside for $683 million. The transaction, struck at a 5 per cent capitalisation rate, reflects a stunning turnaround for large-scale shopping malls as institutional investors pivot back to top-tier assets. Dexus has launched the Dexus Strategic Investment Trust to hold the interest, noting that the scarcity of massive regional centres—due to rising construction costs and land shortages—has created a "golden age" for existing landmark assets in high-growth metropolitan catchments (Wilmot, 2025).

Industrial – Paget Mining Services Hub

Address:
217 Farrellys Rd, Paget

Mackay’s industrial market has set a new pricing benchmark with the $19.5 million sale of a premium mining services hub. Secured by a local syndicate, the 7,339 m² facility transacted at an aggressive rate of $2,657 per m². The deal reflected an initial yield of 6.69 per cent, the tightest capitalisation rate seen in the region for years. Fully leased to Fenner Dunlop and Ace Conveyors until 2032, the asset’s strategic proximity to the Bowen Basin coal reserves continues to drive sustained demand for resource-backed infrastructure (The Courier-Mail, 2025a).

Retail – Seasons IGA Pre-commitment

Address:
63 MacGregor Tce, Bardon

Seasons IGA has secured a 20-year pre-commitment for a 1,600 m² boutique supermarket on a site previously earmarked for a Coles development. The property was sold by Pradella Group for $12.88 million as part of a dual-site transaction. The developer originally planned a larger-scale project but shifted strategy as construction costs rose. Industry sources indicate the lease was struck between $500/m² and $550/m², with the high-end store expected to turn over $350,000 weekly upon its opening in early 2026 (Herde, 2025a).

Medical & Aged Care – Former Frawleys Tennis Club

Address:
56 Coman St, South Rothwell

Victorian-based aged care provider Acare has purchased the 9,825 m² former Frawleys Tennis Club for $6.05 million. The acquisition was driven by the site’s existing approval for a 97-unit retirement village, which significantly de-risked the project for the buyer. Located in Queensland’s third fastest-growing residential region, the deal reflects the strong national mandate for aged-care expansion into high-demand "downsizer" corridors (Herde, 2025a).

Retail & LFR – Porter Square (Former Mitre 10)

Address:
25 Brisbane St, Mackay

Melbourne-based Clover Property has acquired a landmark 1.53ha CBD site for $9.2 million ($603/m²). The site, held by the Porter family for 142 years, will be transformed into a modern retail precinct named 'Porter Square.' The masterplan features 10 tenancies ranging from 180 m² to 1,127 m². The sale reflects Mackay's strong retail tenant demand and the purchaser's confidence in regional hubs with high population growth and "Principal Centre" zoning (Herde, 2025b).

Record $3.3bn International Spend: Brisbane’s 'Bleisure' Transformation

1. The "Bleisure" Capital Effect

Brisbane has officially emerged as Australia’s "bleisure" (business + leisure) capital. Data shows business travellers are staying an average of five days in Brisbane—longer than in Sydney or Melbourne.

• Commercial Impact: This trend is driving a transformation in the Office and Hotel sectors. Developers are increasingly integrating "hospitality-style" amenities into office buildings to cater to high-spending corporate visitors.
• Occupancy Gains: Brisbane recorded the highest year-on-year Revenue Per Available Room (RevPAR) growth in the country at 11%, with ADR reaching a new high of $259.

2. High-Frequency Absorption in Lifestyle Precincts

The 25% surge in UK visitors is specifically benefiting "experience-based" commercial assets.

• Hospitality and Retail: Precincts like Howard Smith Wharves and James Street are seeing zero-percent vacancy in prime lifestyle tenancies.
• Scarcity Value: Secondary-grade retail assets on the CBD fringe are being "pulled up" in value as tenants seek overflow locations.

3. De-risking Short-Term Accommodation (STRA)

The $3.3 billion spend provides a proof of concept for investors targeting the short-term rental market ahead of the 2032 Olympics.

• Yield Compression: Investors are moving toward STRA models in the CBD and inner-north, where nightly yields are now outperforming traditional office yields.
• Institutional Hotel Pipeline: Proven demand is helping hotel projects overcome "feasibility hurdles," allowing financing for luxury keys costing nearly $1 million per room to build.

Regional Construction Costs: Townsville CBD Feasibility

1. The Feasibility "Cliff" for New Builds

Construction costs in Townsville have hit a record $3,066 per m²—the highest in Australia for 2025. This 42.5% hike has created a gap where project end-values fail to cover hard costs (Smith, 2025).

• Commercial Impact: Large-scale CBD projects have stalled, leading to a supply vacuum for brand-new A-grade space.

2. Transition to Adaptive Reuse

Because new construction is cost-prohibitive, older commercial assets are being repurposed into mixed-use hubs.

• Policy Support: Under the City Activation and Housing Incentive Policy, Townsville City Council offers up to $600,000 in infrastructure waivers (Townsville City Council, 2025).
• Notable Projects: Refurbishments of the former Masonic Temple and Citilink Building demonstrate this shift.

3. Tightening of Secondary Stock

As "low-tier" office buildings are converted, the pool of traditional secondary office space is shrinking rapidly.

• Commercial Impact: This withdrawal is forcing a floor under commercial rents, with rental creep observed for remaining functional assets.