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The housing market is firing … but what about commercial?

By Sophie Robinson

By Natasha Dodeja – Principal, Ray White Camp Hill

Brisbane’s housing market is in high demand with auction clearance rates nudging 80% in March – double what they were at the same time last year.

Home owners who choose to sell now are being rewarded with premium gains through market competition.

But what’s the story like in commercial real estate?

As house prices continue to rise in Brisbane, some traditional residential investors are turning their attention to the commercial property market in 2021, seeking out the security of longer-term leases.

Many tenants are making the move to owner-occupancy on the back of record-low interest rates, at the same time.

Here, at Ray White Camp Hill, we offer commercial property solutions alongside our market-leading residential real estate services.

This dual offering allows our clients the convenience of entrusting their full property portfolio and interests to a single, collaborative team, under the one roof.

Brisbane is in recovery mode following COVID-19

Brisbane’s recovery will be driven by key factors – record low interest rates, a growing Queensland economy and game-changing infrastructure projects.

Record low interest rates

Homeowners have been utilising record-low interest rates to upgrade while residential investors have been seeking higher yields than the stagnant returns offered by banks and the risk of volatility of the global share markets.

It’s a similar story in the commercial property market: tenants (business owners) have been taking up the opportunity to transition to owner-occupancy on the back of record-low interest rates. For many commercial tenants throughout the Brisbane area – whether they’re logistics operators in the Trade Coast corridor, retail operators in the eastern suburbs or professionals working in the city fringe – loan repayments are often only marginally higher than rents.

A growing state economy

Australian Bureau of Statistics figures show Queensland’s State Final Demand (SFD) rose 2% in the 2020 December quarter, making it 2.5% higher than the March quarter. These figures win Queensland the strongest growth of any state, over the year, since the March quarter, when the pandemic was declared.

Queensland’s economy has undergone significant diversification beyond the traditional pillars of tourism, mining and property development.

Through start-up hubs like River City Labs and The Precinct, as well as thriving sectors including Advanced Manufacturing, Aerospace, Biomedical and Agribusiness, Queensland is now home to entrepreneurs and organisations that have galvanised the economy to withstand international challenges and capitalise on global opportunities.

Game-changing infrastructure projects

Take a look around Brisbane and you’ll see the River City changing everyday.

The $3.6bn Queen’s Wharf development is transforming the profile of the CBD; the new ferry terminals are harnessing the transport opportunities above the water level on the Brisbane River while the $5.4bn Cross River Rail is taking passengers underneath the city landmark; the new second Brisbane Airport runway opens up increased passenger and freight opportunities around the world; the Inland Rail links the city with Melbourne’s shipping hub and the agri-communities in between; while Brisbane Live proposes to deliver the city a venue on par with any entertainment facility in the world.

These infrastructure projects – combined with Brisbane’s bid to host the 2032 Olympic and Paralympic games – herald an exciting, new era for the city.

Commercial property outlook in Brisbane

The Reserve Bank of Australia has already flagged that the cash rate will remain at record lows for the foreseeable future.

Brisbane’s fast-paced recovery from COVID-19 has delivered commercial real estate investors, owner-occupants and tenants, confidence in their decision making.

Having made the health response the primary focus during COVID-19, the State Government has now positioned the Queensland economy for growth.

Investors are seeking out yield as bank returns dry up and the stop-start health recovery of many major nations places a cloud over share markets.

There are still sectors which face difficulties. Tourism providers and other businesses which are reliant on international travel, such as education RTOs, will continue to be challenged while border restrictions remain in place.

But there are plans afoot to get tourism pumping again, helping reinvigorate a sector that employs 1 in 11 people throughout the state.

Brisbane’s office market

I often get asked: “What will happen with offices after COVID-19?”

Lockdowns forced employees to work from home. Staff have shown they can be productive with video-calls, Microsoft Teams and other tech support.

Workers loved winning back the time that their commute to the city, Valley or South Brisbane added to their day.

However, the novelty has now worn off: staff feel compelled to be on-the-clock earlier / finish later; staff miss the social interaction around the water-cooler; and managers are yearning for the collaborative benefits of the face-to-face environment.

A blend of in-office and work from home arrangements will likely be the scenario for Brisbane in the immediate term. There’s word that many government departments are planning to increase the number of workers they allow back in the offices as a way of stimulating surrounding CBD and fringe economies.

At the same time during the pandemic, there’s been a flight to quality by both owner-occupants and tenants: fringe professional services operators have taken advantage of more competitive leases in higher grade facilities in Woolloongabba, the Valley and Spring Hill – often, they are within the same buildings as their lead clients; some tenants have made the shift to owner-occupancy, become landlords themselves through sub-leasing smaller, surplus floor space.

Offices aren’t dead. In fact, they’re being brought back to life in Brisbane.

Brisbane’s retail market

The retail sector continues to find its feet against changed spending behaviours from consumers, which accelerated during coronavirus shutdowns. Tenants and owner occupants need to find a point of difference to succeed in retail: unique services and products that appeal to an important niche.

During lockdowns, retailers have had to adjust their operations, engaging online sales.

Coorparoo has undergone a retail renaissance with cafes and fast-food operators catering to the young professionals who have moved into the new developments in the suburb.

Camp Hill’s Martha Street precinct has become an eclectic café strip for which people will cross the river to meet up with friends for breakfast, lunch and dinner.

You need to have a clear, well thought-out strategy for your shopfront post COVID-19.

Brisbane’s Industrial market

The industrial sector supported the national economy against the backdrop of lockdowns and will play a leading role in its ongoing recovery.

Well-appointed industrial facilities throughout the TradeCoast corridor have been in demand from transport and logistics operators who have kept the nation’s supermarkets, biomed producers and other essential services supply chains open.

If you’re wanting to better understand market opportunities, buyer and tenant-demand, contact myself at Ray White Camp Hill on 0468 466 973 or visit https://raywhitecamphill.com.au

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