SEQ Commercial Markets Alistair Weir 16 November 2017 · Source: Herron Todd White Research Rents...
Transcript of SEQ Commercial Markets Alistair Weir 16 November 2017 · Source: Herron Todd White Research Rents...
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SEQ Commercial Markets
Alistair Weir
16 November 2017
Source: Raywhitebrisbanecbd.com.au
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Source: Herron Todd White
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Source: Brisbanedevelopment.com, Herron Todd White
It’s All Happening… Queens Wharf
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Source: Herron Todd White, Queensland Government
Cross River Rail
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Source: Courier Mail, Herron Todd White
Howard Smith Wharves
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Source: Brisbanedevelopment.com, Abc.net.au, Courier Mail, Brisbanetimes.com.au
Brisbane Live
Airport Runway Duplication
Brisbane Metro
Southbank Parkland Expansion
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Building Activity
Source: Rlb.com
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Source: Australian Bureau of Statistics, Deloitte Access Economics
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
2012 2013 2014 2015 2016 2017
Gro
wth
Year
Queensland New South Wales Victoria Western Australia
Gross State Product
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-40.00
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-10.00
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110.00
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140.00
Oct 07 Oct 08 Oct 09 Oct 10 Oct 11 Oct 12 Oct 13 Oct 14 Oct 15 Oct 16 Oct 17
Bu
sin
ess C
on
fid
en
ce
Co
nsu
me
r S
en
tim
en
t
Year
Consumer Sentiment Business Confidence
Optimistic
Pessimistic
Business Confidence and Consumer Sentiment
Source: Property Council of Australia
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CBD Office Markets Source: Brisbanedevelopment.com
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-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
-80,000
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Tota
l V
ac
an
cy R
ate
(%
)
Su
pp
ly/
Ne
t A
bso
rpti
on
(sq
m)
Year
New Supply Net Absorption Vacancy
Forecast
CBD Markets Improving
Source: Property Council of Australia
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11.8%
11.6%
20.0%
23.8%
16.1%
21.1%
13.9%
18.6%
17.5%
16.8%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
Prime Grade
A Grade
B Grade
C Grade
D Grade
% Vacancy
Bu
ild
ing
Gra
de
Jul-16
Jul-17
Prime and A Grade Vacancy Improving
Source: Property Council of Australia
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2015 2017
Leasing Report
Source: Herron Todd White
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15.7%
5.9%
6.5%
11.4%
21.1%
16.1%
8.2%
22.5%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
Brisbane CBD
Sydney CBD
Melbourne CBD
Canberra
Perth CBD
Adelaide CBD
Hobart CBD
Darwin CBD
% Vacancy
N.B. As at July 2017
Total Vacancies Across Australian Cities
Source: Property Council of Australia
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Source: Savills, Landmark White
$0
$200
$400
$600
$800
Re
nt
($)
pe
r sq
m
Quarter
Gross Face Gross Effective
A Grade CBD Office Rents
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Rentals ($/m2) Brisbane – CBD
Premium
Gold Coast
A Grade
Sunshine Coast
A Grade
Gross Face Rents $795 - $875 $375 - $470 $330 - $450
Gross Effective Rents $490 - $630 $275 - $390 $250 - $390
Outgoings $125 - $195 $80 - $120 $40 - $80
Net Effective Rents $365 - $435 $195 - $270 $210 - $310
Sales Analysis
Yields (on Net Face rents) 5.75% - 6.25% 8.00% - 9.00% 8.00% - 9.25%
Sales Analysis Rates $10,750 - $13,500 $3,000 - $5,500 $3,000 - $5,500
Key Parameters for Office Markets
Source: Savills
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Source: Architectureanddesign.com.au
Fringe Office Markets
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-8.0
-6.0
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-2.0
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18.0
20.0
-40,000
-20,000
0
20,000
40,000
60,000
80,000
100,000
Tota
l V
ac
an
cy R
ate
(%
)
Su
pp
ly/
Ne
t A
bso
rpti
on
(sq
m)
Year
New Supply Net Absorption Vacancy
Forecast
Brisbane Fringe Office Markets
Source: Property Council of Australia
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11.1%
17.9%
18.4%
11.8%
13.9%
11.0%
20.7%
11.6%
12.6%
10.6%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0%
Inner South
Milton
Spring Hill
Toowong
Urban Renewal
% Vacancy
Jul-16
Jul-17
Brisbane Fringe Vacancy
Source: Property Council of Australia
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Walker Corporation
LaSalle Investment Management
Montpelier Rd
801 Ann St
Fortitude Valley
66 – 69 Montpelier Rd,
Bowen Hills
Fortitude Valley Metro
Redevelopment
Urban Renewal Proposed Projects
Source: Google Images, Brisbanedevelopment.com, Australian Financial Review
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Sale Date: August 2017
Sale Price: $47,000,000
Analysed Yield: 6.6%
Passing Yield: 7.53%
Rate $/sqm lettable area: $7,162
WALE (By Income): 5.74 years
Good Demand For Quality Fringe City Properties
Source: Herron Todd White
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Source: Scentregroup.com
Retail
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Source: Melissahoyer.com
The Changing Face of Retail
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0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
Re
ven
ue
($
Mil
lio
n)
Year
Online Revenue Growth Australia
Source: Australian Bureau of Statistics
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Source: Google Images
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Source: Macquarie Bank
Amazon Revenue Growth R
eve
nu
e (
$ B
illi
on
)
Year
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Source: Daily Mail Australia
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1. JB Hi Fi
2. The Iconic
3. Dan Murphy’s
4. Kogan
5. Catch of the Day
6. Appliances on line
7. Booktopia
8. Red Balloon
9. Temple and Webster
10. Hard to Find
Australia’s Top 10 Online Retailers
Source: Herron Todd White
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• Will aggregate online shopping and accelerate growth
• Large format retail and electronic retailers under pressure
• Retail prices will fall
• Retail rents to stagnate at best or fall
• Retail yields to soften
• Increased demand for near city logistics facilities
• Major retail to undergo transformation
Likely Impacts of Amazon Here
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Industrial Source: Goodman Australia
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Source: Goodman Australia
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Source: Nearmap
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0
100
200
300
400
500
600
700
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Tota
l N
um
be
r o
f S
ale
s
Tota
l S
ale
s V
alu
e (
$M
illi
on
s)
Year
Total Value Bris. Sales Total Value Outer Sales Total No. of Sales
Brisbane Industrial Sales 2007-2017
Source: Pricefinder
Outer LA's comprise Ipswich City Council, Logan City Council, Moreton
Bay Regional Council and Redland City Council.
*Note: 2017 sales are actual results as at 1 October 2017.
Sales can take up to six months to be recorded by DNRM.
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Source: Colliers, Savills
$0
$20
$40
$60
$80
$100
$120
$140
$160
Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17
Re
nt
($)
pe
r sq
m
Year
Prime Net Face Prime Net Effective
Prime Industrial Rents
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Source: Herron Todd White Research
Rents (Net $/m2) Brisbane Gold Coast Sunshine Coast
Prime $105 - $140 $130 - $160 $100 - $150
Secondary $60 - $110 $90 - $120 $80 - $110
Yields
Prime 6.25% - 7.25% 6.50% - 7.50% 7.00% - 8.00%
Secondary 8.00% - 9.75% 7.00% - 8.00% 7.50% - 9.00%
Other 9.00% plus 8.00% plus 9.25% plus
Sales Analysis Rate ($/m2)
Prime $1,300 - $2,300 $1,600 - $2,200 $1,400 - $1,800
Secondary $600 - $1,450 $1,000 - $1,600 $1,000 - $1,400
Land Rate ($/m2)
Prime $220 - $350 $400 - $500 $300 - $350
Secondary $150 - $220 $250 - $350 $120 - $220
Key Parameters for Industrial Markets
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• Trade Coast and South West corridor performing best
• Rents remain flat and declining in secondary areas
• Move to quality buildings
• Incentives now a common feature
• Inland rail to drive development at Bromelton and Acacia Ridge
• Second runway to drive demand in Eagle Farm
Key Takeaways
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Investment Markets Source: Courier Mail
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Have We Hit The Peak?
Source: The Urban Developer
Officeworks North Lakes
Sale Date: October 2017
Sale Price: $7,093,000
Yield: 4.8%
10 year lease-back
1,661 square metres GLA
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Source: Reserve Bank of Australia, Property Council of Australia , Herron Todd White Research
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17
% Y
ield
Year
Office Industrial Neighbourhood Retail Commonwealth Government 10 Year Bond
Prime Yields vs. Commonwealth Government
10 Year Bond Rate
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Source: realcommercial.com.au, Google Images
Address Sale Date Sale Price Land Area
(m2)
Lettable
Area (m2)
WALE
(by Income)
Analysed
Market
Yield
$/m2
Lettable
Area
353-357 Samsonvale Rd,
Warner Oct 2017 $78,350,000 2,006 11,477 Unknown 5.70% $6,827
125-143 Brisbane St,
Beaudesert Jul 2017 $16,850,000 14,230 4,453 6.49 years 6.38% $3,784
677-685 Old Cleveland Rd
East, Wellington Point Jan 2017 $18,125,000 6,099 2,616 5.00 years 6.89% $6,929
Retail
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Commercial Sales
Address Sale Date Sale Price Lettable
Area (m2)
WALE
(by Income)
Analysed
Market
Yield
IRR
$/m2
Lettable
Area
120 Edward St,
Brisbane Jun 2017 $142,650,000 15,271 3.61 years 5.66% 5.32% $8,307
189 Coronation Dr,
Milton Aug 2017 $17,500,000 2,657 3.77 years 6.55% 6.86% $5,476
96 Mt Gravatt-Capalaba
Rd, Upper Mount Gravatt Feb 2017 $29,750,000 7,397 3.47 years 8.69% 7.88% $4,020
Source: realcommercial.com.au, Google Images
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Industrial
Address Sale Date Sale Price Land Area
(m2)
Lettable
Area (m2)
Lease Term
Certain (by
Income)
Analysed
Market
Yield
$/m2
Lettable
Area
Proposed Lot 2001
Metroplex Westgate, Wacol Jul 2017 $35.25M 32,740 9,625 10.00 years 6.24% $3,662
1 Sulphur St,
Narangba Jun 2017 $10.565M 16,230 6,972 10.00 years 7.59% $1,515
655 Macarthur Av,
Pinkenba Aug 2017 $8.65M 10,565 3,629 10.00 years 6.94% $2,384
Source: realcommercial.com.au, Google Images
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Child Care Source: Goodstart.org.au
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Source: Realcommercial.com.au
Service Stations
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Medical Source: Google Images
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• Batten down the hatches for Commercial and Residential Development for a
few years
• Retail in for years of upheaval across many sub-sectors
• Industrial solid and to grow steadily
• Investment yields to remain stable or start to soften
• Very little foreseeable rental growth in any sectors in SEQ
Key Takeaways
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Source: Cox Architecture
Gold Coast
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200,000m²
250,000m²
300,000m²
350,000m²
400,000m²
450,000m²
500,000m²
Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Sq
ua
re m
etr
es
Year
Occupied Vacant
11.3% 24.1%
4.5%
PCA Occupancy – July 2017
Source: Property Council of Australia
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Occupied
88.7%
Broadbeach
2,617m² Bundall
9,761m²
Robina / Varsity
9,271m²
Southport
20,729m²
Surfers
10,606m² Vacant
11.3%
Gold Coast Office Vacancy Spread
Southport 14.0% Broadbeach 8.7%
Surfers Paradise 15.1% Bundall 11.5%
Robina / Varsity 6.8%
PCA Occupancy – July 2017
Source: Property Council of Australia
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Source: Gold Coast Bulletin, Scentre Group
Proposed Coomera Town Centre
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130 Bundall Rd, Bundall
Sale Date: Jun 2017
Sale Price: $8,000,000
Rate $/sqm: $2,160 per square
Average Rent: $285/sqm (estimated)
WALE: 0.74 years (52% vacant)
Yield: IY: 1.61% AY: 7.33%
183 Varsity Pde, Varsity Lakes
Sale Date: Feb 2017
Sale Price: $11,800,000
Rate $/sqm: $3,742 per square metre
Average Rent: $403
WALE: 2.25 years (100% leased)
Yield: IY: 7.95% AY: 7.5%
Noteworthy Transactions
Source: Google Images
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Sunshine Coast Source: Google Images
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Sunshine Plaza
Source: Google Images
Ground Floor First Floor
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Bokarina Beach Development
Source: Dailymercury.com.au
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Where Would I Spend $10M?
Source: Google Images, Herron Todd White
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Source: Herron Todd White
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Disclaimer
The information contained in this report is provided in good faith and
has been derived from sources believed to be reliable and accurate.
However, the report is not intended to be comprehensive or render
advice and neither Herron Todd White nor any persons involved in the
preparation of this report accepts any form of liability for its contents.
This report has copyright and cannot be reproduced without written
permission of Herron Todd White.