Investors dominate commercial property in Brisbane
Media release - 17th June, 2015
Investors and self-managed super funds (SMSFs), rather than owner occupiers, are dominating commercial markets under $3 million in Brisbane’s southern suburbs, according to one of the area’s leading commercial agents, Joseph Grasso.
“Any investment property valued around the $3 million mark with a quality long-term lease, whether it’s an industrial, retail, and to a lesser extent, an office asset, is being snapped by the marketplace,” said Mr Grasso, Director of Raine & Horne Commercial Brisbane Southside.
As an example, Raine & Horne Commercial Brisbane Southside recently secured the sale of a tilt slope building at 32 Perrin Place, Salisbury for $3.61 million, which is currently tenanted by Actrol Parts. Actrol is Australia’s largest wholesaler of parts to the refrigeration, air conditioning and allied industries and was recently acquired by ASX listed Reece Australia Limited (ASX:REH).
“We sold it at a nett yield of 7.5% to a local private investor, whereas the same property would have sold for a nett yield of 8.25% a year ago. This is the impact of falling interest rates,” said Mr Grasso.
“The 1787 sqm building was constructed in 1999 on a flood free location, which comes with full security fencing, good truck access and fully partitioned air-conditioned offices and meeting rooms. There were two committed buyers and the property sold in 48 hours.”
According to Mr Grasso, investors are paying more for commercial assets in 2015 because low interest rates are helping to make them more viable.
“12 months ago around 70% of our transactions were leases, while now it’s more like half of all commercial transactions are sales,” said Mr Grasso, who confirmed that investors are proving the dominant buying group.
“The stock market has topped out, and with low interest rates meaning that you can only can get about 2.5% for a cash holding, investors are recognising that a 7.5% yield after all outgoings are paid is exceptional.
“If you’re paying 4.3% for your finance and getting 7.5% nett, you’re 3% in front even without the benefits of depreciation.”
The commercial markets south of Brisbane are also showing some form, with the industrial sector leading the way.
“There has been a pickup in enquiries for commercial property in the Logan City region, although it’s mostly from businesses looking to purchase or lease,” said John Tamblyn, Co-Managing Director, Raine & Horne Commercial Beenleigh.
“Lower interest rates are creating the right environment for businesses to expand, while an improvement in confidence is also assisting local commercial markets,” said Mr Tamblyn.
“There’s not a lot of investment stock available and if we had more, we expect there would be more investor enquiry.”
In the Beenleigh region, demand for industrial and office space has been relatively robust.
“Industrial is the dominant commercial asset class in our region, given that Beenleigh is equidistant between Brisbane and the Gold Coast, which enables businesses in our region to service both cities,” said Mr Tamblyn.
“We are seeing decent demand for industrial property under $2 million.”
The success of the Brisbane commercial real estate market has inspired Raine & Horne Commercial to explore opportunities in the north of the state.
“Brisbane is the engine room of Queensland’s commercial real estate markets, so when it’s robust, this success translates to other regional cities such as Cairns and Townsville,” said Angus Raine, Executive Chairman of Raine & Horne Commercial.
“As such we are looking to establish offices in Cairns and Townsville to service the commercial property interests of businesses and investors in Far North Queensland.
“These offices will supplement the Raine & Horne Commercial brand’s extensive footprint, which has 35 offices covering every Australian capital city and most major regional population centres.”
For further media information contact:
Angus Raine, Executive Chairman, Raine & Horne Commercial on 0409 920 697
Andrew Harrington, National Communications Manager, Raine & Horne on 02 9258 5400