Typically, agents have indicated that high construction costs together with high land selling prices are reducing the profitability of developers to buy and build speculative developments. Generally, unimproved properties which require less site works would achieve better analysed rates ($/m2) when compared to sites that require more or extensive site works to achieve a suitable building platform.

We know Valuations. We know Queensland.

McGees Property specialises in market value assessments for acquisitions, disposals, financial reporting, SMSF audit and decision making purposes. Should you need any valuation services, please contact Scott Campbell 0403 165 355 or Owen Thorn 0405 415 645.

This Article is for general information only and should not be relied on as advice. You should consider your personal situation and seek advice that is specific to your circumstances before making any decisions based on this information. Liability limited by a scheme approved under Professional Standards Legislation.

McGees Property Brisbane acknowledges the Traditional Custodians of the Land upon which we live, work and walk, and pay our respects to Elders past, present and emerging.

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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The Brisbane CBD retail vacancy rate is currently around 19%, with greater vacancy in fringe locations away from core pedestrian thoroughfares. Local real estate agents are indicating when tenants want to lease premises, they desire prime locations with high pedestrian foot traffic passing. While the number of people in the CBD continues to slowly increase, stagnating gross effective rental rates continue to illustrate the ongoing challenges retailers have in the post Covid-19 business environment.

Below are a sample of recent CBD retail leasing transactions.

Impact on Commercial Property Investors – Brisbane CBD Retail Sector

The Brisbane CBD retail market is facing significant challenges, as evidenced by the high vacancy rates and the ongoing difficulties retailers encounter in the post-COVID-19 environment. Here is an analysis of the potential impact on commercial property investors based on the information provided:

1. High Vacancy Rates: The current vacancy rate of around 19% in the Brisbane CBD, particularly in fringe locations, is a concerning factor for commercial property investors. High vacancy rates typically translate to longer periods to secure tenants, increased holding costs, and potentially lower rental income. Investors in retail properties located away from core pedestrian areas may find it difficult to attract and retain tenants, leading to underperformance of their assets.

2. Tenant Preferences for Prime Locations: The preference of tenants for prime locations with high pedestrian traffic is driving demand for certain areas within the CBD while leaving other locations with higher vacancies. For investors, this highlights the importance of asset location in investment decisions. Properties in high-traffic areas are likely to perform better, with lower vacancy rates and higher rental yields, whereas properties in less desirable locations may struggle.

3. Stagnant Gross Effective Rental Rates: The stagnation in gross effective rental rates reflects the challenges retailers face in the current market. For investors, this stagnation means that income growth from rental properties may be limited in the short to medium term. With retailers hesitant to commit to higher rents, investors may need to offer more favourable lease terms, such as rent-free periods or incentives, which can further impact returns.

4. Recent Leasing Transactions: The sample of recent CBD retail leasing transactions shows a wide range of gross rental rates, from $530/m² to $1,850/m². This variation underscores the importance of location and the specific use of the space in determining rental value. Investors in high-demand areas, such as Adelaide Street, may continue to achieve premium rents, while those in less central areas may face more modest returns.

5. Annual Rental Reviews: The inclusion of annual rental reviews in recent leases, generally ranging between 3.0% and 4.0%, provides a measure of income growth over the lease term. However, in an environment of stagnant rental rates, the effectiveness of these reviews in driving significant rental income increases may be limited. Investors should consider the likelihood of achieving these reviews, particularly if market conditions remain challenging.

6. Post-COVID-19 Retail Environment: The broader retail environment remains uncertain as businesses continue to navigate the post-COVID-19 landscape. For investors, this uncertainty may translate into increased risk, with the potential for more tenant turnover and renegotiation of lease terms. Diversifying portfolios to include properties in prime locations or sectors less impacted by retail challenges could be a strategy to mitigate these risks.

Conclusion

For commercial property investors in the Brisbane CBD retail market, the current environment presents both challenges and opportunities. The high vacancy rates and stagnant rental growth underscore the importance of location and tenant demand in achieving strong returns. Investors with properties in prime, high-traffic areas may continue to perform well, while those with assets in less desirable locations may need to adopt more flexible strategies to maintain occupancy and income. As the market continues to recover from the impacts of COVID-19, careful attention to market trends and tenant needs will be crucial for long-term success.

Written by McGees Property Brisbane Valuations

Scott Campbell and Owen Thorn

McGees Property specialises in market value assessments for acquisitions, disposals, financial reporting, SMSF audit and decision making purposes.

Should you need any valuation services, please contact:

Scott Campbell 0403 165 355 or Owen Thorn 0405 415 645.

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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According to development experts, the commercial property development market in Brisbane is up against a significant challenge: an insufficient number of builders to keep pace with the region’s rapid growth and infrastructure demands as it heads into the next decade.

Considering recent reports, there’s concern over whether the current construction capacity can meet the scale of upcoming projects. With office developments, such as the 45,000m2 project at 205 North Quay, approaching full commitment for Q4 2024, the need for qualified builders has skyrocketed.

The issue extends beyond private sector undertakings and includes government-led initiatives as the city prepares for global events like the Olympics. Schools, hospitals, infrastructure projects, new commercial offices, and retail spaces are all in line for development.

A high-growth state like Queensland typically welcomes these challenges. Still, with recent builder insolvencies and license restrictions impacting the construction landscape, there’s an urgent call for proactive measures to bolster the building industry.

As the development community feels the pinch, the competition has intensified, not just within the private sector but also between government projects and the upcoming demand for Olympic-related constructions.

The sentiment within the Queensland development circles echoes nationwide concerns; developers are urged to consider risk-sharing arrangements to safeguard project completions. As market conditions have shifted, locking in contracts at below-market rates is no longer sustainable, with many recognising the need for a more balanced approach to risk allocation in contracts.

With the Australian Securities and Investments Commission noting a surge in sector insolvencies by over 75% this past year, it’s clear that the Brisbane commercial property development market faces a critical juncture.

Developers and builders must now collaborate closer than ever, ensuring the city’s economic boom doesn’t falter due to a shortfall in construction capabilities. The future of Brisbane’s skyline may very well depend on it.

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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Since inflation began to rise in late 2020, and peaking at 7.8% in December 2022, the Reserve Bank of Australia (RBA) continues to keenly observe how rising inflation is impacting the costs of everyday goods and services, both domestically and abroad. Seeking to bring inflation to within its target range between 2 -3 percent by adjusting the cash rate.

Recent Monthly Inflation data (which only looks at around two-thirds of the items included in the quarterly CPI basket) for the month of November 2023 fell a further 0.6%, to be at 4.3%, continuing its downward trend.

This continuing trend towards the target range should influence the RBA to continue to hold the cash rate firm in their next meeting on the first Tuesday of February.

Further supportive data in holding the cash rate firm is the changes in the national employment data. While the national unemployment rate has remained steady at 3.9%, the configuration of Australian employment is important. Full time jobs fell by 106,600 positions, with Part time positions up by 41,400 and the participation rate fell slightly. With job advertisements continuing to fall, the overall labour market is showing consistent signs that it is easing, placing lower inflationary pressures from wages growth, which is the RBA desired outcome.

Impact on Commercial Property Investors

1. Stable Cash Rates: The expectation that the Reserve Bank of Australia (RBA) may hold the cash rate firm due to the downward trend in inflation is significant for commercial property investors. Stable cash rates help maintain borrowing costs at current levels, which is beneficial for investors who rely on financing for property acquisitions or developments. Lower or stable interest rates make commercial property investments more attractive compared to other investment options, potentially increasing demand in the market.

2. Inflation and Rent Growth: As inflation continues to trend towards the RBA’s target range, commercial property investors may see more predictable rent growth. High inflation periods often lead to rent increases as landlords pass on rising costs to tenants. However, as inflation stabilises, rent increases may moderate, leading to more stable rental income streams. This predictability can make long-term investment planning easier and less risky.

3. Employment Trends and Demand for Commercial Space: The shift in employment configuration, with a decrease in full-time positions and an increase in part-time roles, could impact the demand for commercial space, particularly in office sectors. A softening labour market might reduce demand for office spaces as companies adjust their space requirements to fit a changing workforce. This could lead to increased vacancies or slower lease-up rates for new developments, potentially impacting investor returns.

4. Easing Wage Pressures: The article notes that the labour market is easing, which is reducing inflationary pressures from wage growth. For commercial property investors, this could mean that operational costs, including those related to staffing for property management, might not rise as sharply. This stabilisation can contribute to better control over expenses, thus improving net operating income (NOI) and overall property value.

5. Market Confidence: The overall economic stability suggested by the data—falling inflation, stable unemployment, and easing wage pressures—can boost investor confidence in the commercial property market. When investors perceive the broader economic environment as stable, they are more likely to make new investments or expand their portfolios, contributing to a more robust and competitive market.

In summary, for commercial property investors, the current economic indicators suggest a period of stability and predictability. While there may be some challenges related to changing employment trends and their impact on office space demand, the overall outlook is positive, with stable borrowing costs and controlled inflation likely supporting investment decisions in the commercial property sector.

Written by McGees Property Brisbane Valuations

Scott Campbell and Owen Thorn

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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The Property Council of Australia’s Office Market Report recently released has shed some light on the changing profile of the CBD and non-CBD office markets across Australia. The post-COVID-19 economy has been particularly challenging for some office locations, with many staff continuing to work from home. This shift has changed the nature of new take up of space and movement across regions.

The two largest areas hit by this change are Sydney and Melbourne’s CBDs, which have recorded negative net absorption and increased vacancy rates to 11.3% and 13.8% respectively. On the other hand, cities that were not subjected to stringent lockdown measures, such as Brisbane and Perth’s CBDs, remain positive with regards to space take up thus resulting in an improved occupancy rate.

Additionally, people are increasingly moving out of city centres into growing employment hubs that follow population growth trends, indicating a wider pattern across Australia’s property industry. Here’s what the report found for local markets.

The high population growth in Queensland is having a positive impact on the office market across the State. Brisbane Fringe recorded the second highest net absorption of all Australian office markets with 63,625m², making it the largest non-CBD office market in the country at over 1.3 million m² in stock. The region is improving due to people’s changing preference for parking and affordable, quality accommodation options.

Meanwhile, Brisbane’s CBD – the fourth largest one in the whole country – has recorded the greatest take up rate within the last 12 months with current vacancies sitting at 12.9% (lower than its 10 year average of 14.3%). This can be attributed to an increasing employment demand from population growth as well as businesses looking to expand or fill existing stock.

The Sunshine Coast and Gold Coast are also two strong performers that have both seen their vacancy rates falling to record lows due to population growth and new business starts. The Sunshine Coast vacancy rate currently sits at 4.0% while Gold Coast vacancy is down to 6.0% (the lowest since 2008). A-grade assets continue to be highly sought after due to limited new stock being added over recent years.

The evolving dynamics of the office market across Australia present both challenges and opportunities for investors and tenants alike. Whether you are looking to capitalise on the positive growth trends in Brisbane and its fringes, secure a prime location in a growing employment hub like the Sunshine Coast or Gold Coast, or need guidance on navigating the shifting landscape of Sydney and Melbourne’s CBDs, McGees Property is here to assist you.

For Investors: The post-COVID-19 environment is reshaping the commercial property market, with certain regions experiencing robust growth and others facing challenges. Now is the time to review your portfolio, identify strategic opportunities, and make informed decisions that will yield long-term benefits. Our experienced team at McGees Property can provide you with comprehensive market insights, property valuation services, and tailored advice to help you maximise your investment returns.

For Tenants: Finding the right office space that aligns with your business needs is more critical than ever. Whether you are expanding, relocating, or seeking better terms, McGees Property offers expert leasing advice and can help you secure a location that supports your business goals. With vacancy rates dropping in key areas, now is the time to act.

Contact Us Today: Let McGees Property guide you through your next investment or leasing decision. Reach out to our expert team for personalised advice on property acquisitions, disposals, financial reporting, or leasing opportunities. We are here to help you make the most of the current market conditions.
Email: agency.admin@bne.mcgees.com.au

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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We don’t expect international traveller numbers to return to pre-pandemic levels straight away (according to Tourism Australia, an average of around 790,000 international visitors a month arrived on our shores in the year to December 2019), however, we do think the numbers will steadily increase to a new slightly lower normal.

From some recent research, we can highlight a few transactions from the later part of 2021 of tourist or leisure operations which demonstrate the resilience and confidence the market has in the tourism industry:

24 Box Street, Buderim

394 Shute Harbour Road, Airlie Beach

139 Lutter Road, Charlwood

1973 Cape Tribulation Road, Diwan

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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Driven by Australians desire for dining out and sophisticated coffee culture, the restaurant/café sector had been trending positively until the onset of COVID-19. According to ABS data, revenue significantly decreased by approximately 50% through the first quarter of 2020. This was due to government enforced mandates forcing all non-essential businesses to temporarily close and workers to remain at home. However, as restrictions eased, businesses were able to reopen allowing consumers to return. The below graph highlights how sector revenue gradually returned to pre-pandemic levels by the end of 2021 driven by easing restrictions, the desire to ‘socialise’ with friends and family and the rise in discretionary household income.

Café, Restaurants and Takeaway Food Services

ABS, Retail Trade, Australia November 2021

Below is a snapshot of recent city fringe restaurant and café leasing transactions:

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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Locations for Childcare sites are often sought in areas where permissible zoning exists, is centrally located to places of employment, densely populated residential precincts and include a greater percentage of households where both parents are working full-time.

Becoming more popular are purpose-built assets which incorporate an additional healthcare and social assistance provider. These assets are designed to provide a point of difference, allowing childcare providers to offer additional medical related services.

Below is a snapshot of recent Childcare development site acquisitions.

373 Samford Road, Gaythorne

182 Old Northern Road, Everton Park

720-724 Ipswich Road, Annerley

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.

Liability Limited by a Scheme approved under Professional Standards Legislation