Queensland 2020 property market outlook: Savills
Queensland 2020 property market outlook: Savills
3 January 2020
Savills recently provided a 2020 property market outlook for each state in Australia. Here’s a summary of predictions for Queensland.
Capital markets
Brisbane’s office market continues to be driven by the city’s strong relative value proposition. 2019 can be best characterised by robust capital investment, improved leasing market fundamentals and renewed optimism.
Anthony Ott, Managing Director of Queensland at Savills Australia, said that there has been a consistent investment appetite throughout 2019 which has been evident through strong transaction volumes, particularly across the CBD.
“Further reduction in interest rates, a lowering in office vacancy and positive outlook in terms of tenant demand, together with a scarcity of available assets in other Australian markets, has all contributed to investors’ positive disposition to the Brisbane market,” Mr Ott said.
While foreign investors continued to be active in the market, deploying $1.4 billion over ten deals, there was a reduction in capital inflow from offshore investors of approximately $700 million in the CBD market and approximately $1.8 billion of capital outflows from foreign owners.
“Despite ongoing activity from offshore buyers into the Brisbane market, the State Governments decision to impose increased land tax charges on foreign investors has certainly been a factor in slowing the quantum of investment from offshore entities,” said Mr Ott.
Metro and regional sales
Queensland’s metropolitan and regional markets have been led by acquisitive foreign investors, syndicates, and private investors chasing yield.
Gregory Woods, Director of Metropolitan and Regional Markets at Savills Australia, declared 2019 ‘a year of sustained investment appetite’.
“This, along with improved leasing fundamentals and ongoing development activity in established and gentrifying commercial locations, is positioning Brisbane’s metropolitan and regional investment markets well, moving into 2020,” Mr Woods said.
Throughout 2019 YTD, Queensland’s metropolitan and regional office markets witnessed 35 assets (≥$5m) change hands, totaling $1 billion. Although, taking into account a year-on-year decline of 21% in total investment volumes, transactions were more numerous in number, up from 31 recorded from the previous year.
Industrial
According to Savills Australia, major project and infrastructure completions in Queensland have helped stimulate economic progression, industrial investment demand, and leasing take up,
Callum Stenson, State Director of Industrial & Logistics at Savills Australia, noted that a positive spill-over effect into Brisbane’s industrial markets was imminent.
“Investors are searching the market for quality investments and after a strong flurry at the start of the year, which saw some major transactions in Brisbane, the paucity of stock has stifled these major transactions,” Mr Stenson said.
Savills have recorded three major industrial sales transacting at over $100 million in 2019 across the Brisbane market: 111-137 Magnesium Drive at Crestmead for $182.50 million, 99 Sandstone Place, Parkinson for $134.2 million and 81 Schneider Road in Eagle Farm at $102.5 million.
“However, there currently remains a lack of quality industrial investment offerings in the $10 million plus range being brought to the market,” Mr Stenson said.
Queensland’s online retail demand will continue to drive requirements across the market, where ecommerce logistics, distribution and warehousing has shown a growth of 5.2% annually, which was the highest of any state nationally.
Office
The Brisbane CBD office leasing market is continuing to strengthen with positive net absorption anticipated to continue during 2020.
Quality of product and amenity continues to attract tenants of all sizes with much of the demand heightened by withdrawal of the Brisbane Transit Centre along with others over the past 12 months.
According to John McDonald, State Director of Office Leasing at Savills Australia, 2019 has demonstrated another active year for the commercial office leasing sector with vacancy tightening from 13% to 11.9% in the six months from January to July 2019.
“The last twelve months has seen an improvement in sentiment across the Brisbane office markets, which has been fueled largely by co-working expansion, State and Federal Government requirements and the rebounding resources and infrastructure sector,” Mr McDonald said.
Hotels
A flurry of interstate buyer activity has rounded out a solid year for Queensland’s Regional Hotel market, with interstate conditions forecasted to position these assets favourably in 2020.
According to Leon Alaban, Director of Hotels at Savills Australia, South East Queensland’s Hotel market has remained mostly tightly held throughout 2019, with strategic off-market opportunities transacting.
“Pubs remain a solid and preferred investment type representing good cash flow and value in comparison to other investment types.
“We expect to see investors turn their attention even more towards Hotel assets as the trend becomes more prominent throughout 2020,” he said.