Brisbane’s commercial real estate ecosystem has changed since the pandemic, but opportunities to invest in Brisbane property in 2021 are more prevalent than ever. Investors just need to know where to look – and what to look for.
Brisbane’s commercial real estate market outlook for 2021 is quite positive amidst unprecedented uncertainty. The ecosystem in QLD has changed since the pandemic, but opportunities for investment are more prevalent than ever. Investors just need to know where to look to buy high-quality Brisbane commercial property – and what to look for.
Logistics shines for industrial real estate
COVID-19 has created huge opportunities around Australia for industrial real estate occupants. Many logistics companies have been labelled essential services, and are in high demand throughout our capital cities’ leasing markets. Brisbane’s commercial property market is no different.
QLD has a 1.85-million square kilometre area and is home to 5.07 million people. So, there’s a huge need for logistics and transport hubs to service such a widespread population, with more people committing to online sales for their retail consumption.
eCommerce giant Amazon has nodded their approval of QLD as an industrial and logistics hub, with their latest Australian fulfilment centre built in Lytton, an outer riverside suburb in Brisbane.
“Industrial property in Australia has experienced strong capital value growth and yield compression with continued demand from both domestic private and institutional groups and foreign investors.” – Savills
We called it last year that Brisbane could see boom-like conditions in its industrial real estate market. Some things don’t change, even in the face of a pandemic.
Retail property market led by LFR assets
Retail’s comeback post-COVID is expected to be slow.
Investors shouldn’t be shocked, given that online retail trade grew 5.6 per cent month on month in March 2020, and 21.8 per cent year on year, which outpaced the annual total retail trade growth of 4.6 per cent. The growth is expected to continue into 2021.
That said, particular retailers in QLD – especially big box retail – are faring very well in the pandemic environment. Stores selling items that online aficionados are less likely to buy with a click of a mouse – furniture, home entertainment systems – are performing exceptionally well. Our own Large Format Retail (LFR) assets in QLD have outmuscled the coronavirus and continue to operate without concern.
In Townsville QLD, our Woolcock Street Supa Stores’ 4WD Supa Centre opened in early October 2020. Store checkouts were flooded with foot traffic, evidencing the relevance of bricks and mortar retail in QLD.
Even brands like Baby Bunting (another fantastic tenant of ours) have outpaced performance from previous years, given the outlet is effectively essential services (for those wearing diapers).
The ASX-listed outfit smashed their previous year’s sales results with EBITDA for FY20 at $33.7 million. That’s a 24.1 per cent increase on the previous year despite bushfires, eCommerce and COVID-19 threatening their operation.
Large Format Retail remains the Brisbane commercial retail sector’s golden goose.
Many are also keeping an eye on retail’s essential services. These are the most ‘defensive’ tenants to have during something like COVID-19 and will continue to bode well into 2021. Supermarkets are the obvious essential service boasting impressive bottom lines during 2020.
Office property market on the up
Brisbane’s commercial office property market is wide open with opportunities for those willing to hunt them down.
Concerns were raised earlier in 2020 about the Australian office market’s survival post-COVID. It looks more and more like the asset class could be on the up, despite the guesswork of property experts. Here’s why:
Average gross effective rent on many Brisbane commercial office buildings have almost returned to levels seen a decade ago. Particularly with B Grade office in the Brisbane CBD:
This is important because B Grade office makes up 38 per cent of Brisbane’s office market (second to A Grade office at 40 per cent). Many of these buildings remain in great locations near the Brisbane CBD.
Affordability for office tenants could play a huge factor in the continued demand of Brisbane office space, despite the office evolution many expect post-COVID.
According to the Property Council of Australia (PCA), Brisbane’s office market appears to be weathering the effects of the coronavirus.
Graham Postma, Savills Australia National Head of Office Leasing, has echoed the PCA’s sentiments, calling out Brisbane, Adelaide, and Perth as the most resilient office markets in Australia.
“Where restrictions have further eased in these key states, tenants are now back in their offices in higher proportions and enquiry and inspection levels are returning to more normalised levels,” he said.
Whether the 12.9-per cent vacancy in Brisbane’s CBD is likely to drop, is an opinion yet to be cemented in property experts minds. Many tenants are reviewing their office space requirements in light of the coronavirus.
But to say the office market will be wiped out by COVID-19 is likely a severe overstatement. Those investors listening to these sorts of views are a lot more likely to see themselves miss out on exceptional office property investment opportunities.
Mining, infrastructure and population
Infrastructure spending and population growth in Brisbane continue to put the state in astute commercial property investors’ sights.
Mining remains a huge catalyst for interstate migration to QLD and a major muscle for the state economy’s growth. Brisbane’s commercial real estate sector is set to benefit.
As at September 2020, employment in Queensland’s mining industry has surpassed figures at the height of the boom in 2012, according to CQ University regional development expert John Rolfe. It now employs more than 60,000 people, with 20,000 of them based in Central Queensland.
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