This article is from the Australian Property Journal archive
OFFSHORE investors continue snapping up Brisbane CBD office buildings, accounting for 78% of transactions, enticed by its growth potential and improving leasing market conditions.
Knight Frank’s latest Office Market Overview recorded $1.75 billion of transactions in the 12 months to September, higher than the $1.53 billion a year earlier.
Justin Bond, Knight Frank senior director of institutional sales, said investor interest in the Brisbane CBD office market, particularly from offshore buyers, has accelerated over the course of 2018.
“Offshore investors were the most prominent purchasers, accounting for 78% of these transactions by value. AREITs and unlisted funds and syndicates were the remaining purchaser classes with all other buyers currently being outbid,” Bond said.
Interest from offshore buyers in the Brisbane office market saw a fourfold increase from $366.9 million invested in 2015 up to $1.553 billion in 2017.
“With more than $1 billion transacted in 2018, to date this year is also on track to be strongly weighted towards offshore buyers,” Bond said.
During 2016, 2017 and 2018 year to date, offshore buying has been concentrated in the CBD, with $2.6 billion in investment, while there has been $653 million (around 20%) spent on assets through the city fringe.
“The city is attracting a diverse range of institutional investors from around the world, with major institutional investors from Singapore, Korea, the US and the UK all active.
“They are attracted to the city’s long term growth potential and declining office vacancy.
The mix of buyers we see in the Brisbane market contrasts with that in Sydney and Melbourne, where private capital from China and Hong Kong has been more prevalent recently.”
Eight of the eleven CBD sales recorded were secondary buildings. The three prime sales included Singaporean sovereign wealth fund GIC’s purchase of the 37-level, 34,000 sqm 32 Turbot Street A-grade tower for $370 million from Malaysian government-owned Permodalan Nasional Berhad; JPMorgan Asset Management’s purchase of 53 Albert Street from financial services firm Challenger for more than $250 million, and Mirvac secured Asia Pacific core fund M&G Real Estate as a 50% joint venture partner for its $836 million 80 Ann Street tower.
“Purchasers seeking a Brisbane presence, with core plus/value add mandates, were willing to push prices as recovery in the leasing market is well entrenched, which resulted in greater liquidity of secondary assets in the market.
“Yields have continued to tighten across both prime and secondary markets as the improving tenant demand has given purchasers new confidence in Brisbane.”
Knight Frank expects higher tenant demand, stock withdrawals and limited new supply until the second half of 2019 push vacancies below 13% by the end of 2018, having fallen from 16.1% in January to 14.6% in July.
Amid divergence in the prime and secondary markets, with respective vacancies of 11.1% and 19.3%, both have seen effective rental growth. Prime rents are up by 5.1% over the year to July 2018.
A major pipeline of infrastructure projects through the city, including the $3 billion Queen’s Wharf project that will transform 27.3 hectares of waterfront sites into a casino, resort and residential precinct; the planned $1.4 billion Eagle Street Pier overhaul, and the Cross River Rail project are making the CBD a more attractive proposition.
Australian Property Journal
