2023-03-07-莱坊-Brisbane_Suburban_Office_Market_Report_February_2023_7页_5mb

Brisbane Suburban Office Market Summary

Core Content

The Brisbane suburban office market has demonstrated resilience and growth potential despite recent economic challenges. It is increasingly viewed as a valuable asset class for a balanced investment portfolio due to its attractive price points and strategic location outside the CBD. The market has seen a notable decline in transaction volumes from 2021 to 2022, but remains above pre-COVID levels, indicating sustained interest and demand.

Main Points

Market Overview

• The suburban office market has matured and is now a key component of the broader Brisbane office market.
• It offers a lower cost entry point compared to CBD properties and is appealing to a wide range of investors, including unlisted funds and syndicates.
• Assets with strong core tenants, prime locations, and ESG accreditation are highly sought after.

Transaction Activity

• 2021: Total transactions reached $479 million, the highest in recent years and almost equivalent to the previous three years combined.
• 2022: Transactions fell to $266.66 million, a 44% decrease, but still above pre-pandemic levels.
• Major sales in 2022 were concentrated in modern developments within established business parks, particularly in Hamilton and Cannon Hill.

Yield Trends

• Yields have softened due to increased debt costs, with the current median core market yield at 6.58% across five suburban precincts.
• The range of yields is between 5.9% and 7.25%.
• A potential sale of 101 Southgate St, Cannon Hill, could result in a core market yield of 6.25%, indicating further yield softening if debt costs remain elevated.

Economic and Inflationary Context

• Inflation in Australia reached 7.8% in the December 2022 quarter, prompting central banks to raise interest rates.
• The RBA increased the cash rate from 0.1% to 3.35% since May 2022, with further increases expected in 2023, likely peaking between 3.85% and 4.00%.
• Despite higher rates, economic growth remains robust, with Q3-22 GDP growth at 0.6% and an annual uplift of 5.9%, outperforming most advanced economies.

Supply and Development

• 2023 is expected to see the highest supply in 7 years, with just under 17,000sqm under construction across major office parks.
• Cannon Hill and Hamilton are key areas with significant development activity.
• Southgate Business Park in Cannon Hill has seen the completion of the Michael Hill development, with the Raytheon Building under construction, adding to the area's appeal.
• Eight Mile Plains has seen several new developments, including the CIMIC Building and Freeway Office Park.

Tenant Demand

• Strong population growth and infrastructure investment are driving demand for suburban office space.
• Employment in Queensland has surpassed pre-pandemic levels, with 210,600 more jobs than in 2020.
• Modern, well-located office buildings within established parks are in high demand, especially from tenants in defence, technology, and retail sectors.
• Rental rates range from $430 to $485 per sqm, with incentives still elevated, making older or secondary assets competitive on price.

Key Information

Recent Completed Projects

• 385 Macarthur Avenue, Hamilton: 3,568sqm, 100% occupied, sold for $30.60 million at a core market yield of 6.0%.
• 34 Southgate Ave, Cannon Hill: 3,520sqm, 100% pre-committed to Michael Hill Jeweller, sold for $36.0 million at 5.0% yield.
• 365 Macarthur Avenue, Hamilton: 5,040sqm, sold for $43.50 million at 5.30% yield.

Under Construction

• 101 Southgate Ave, Cannon Hill: 6,499sqm, 100% committed, expected completion in 2023.
• 391 Macarthur Avenue, Hamilton: 3,592sqm, expected completion in May 2023.
• 5 Miles Platting Road, Eight Mile Plains: 3,000sqm, estimated completion in 2023.
• 391 Macarthur Avenue, Hamilton: 3,592sqm, expected completion in May 2023.

Development Approvals

• Several projects are in active planning, including 11 Corporate Drive, Cannon Hill, 23 Miles Platting Road, Eight Mile Plains, and 70 Park Road, Yeronga.

Infrastructure Impact

• Cross River Rail is progressing, enhancing rail connectivity to the Gold Coast and southern suburbs from 2025.
• The Brisbane Metro project, supported by the City Deal, is expected to improve accessibility and reduce commute times, further boosting demand.

Conclusion

The Brisbane suburban office market continues to be a key focus for investors seeking value and diversity. While recent transaction volumes have declined, the market remains active and attractive due to strong tenant demand, ongoing infrastructure development, and a resilient economic environment. The coming years are expected to see increased supply and potential yield softening, making it a strategic investment opportunity.