Q1 Report

Commercial Research

BETWEEN THE LINES Bayside Commercial 1Q wrap April 2021

The Bayside commercial market started 2021 full of optimism after a busy end to 2020. To date market activity has not disappointed with a flurry of transactions occurring across both sales and leasing as the market responds to low interest rates and the appetite of investors to secure quality, income-producing assets. Vendors have responded with assets coming to the market bringing preliminary volumes for the last 12 months to the end of 1Q 2021 to over $126 million, a three-year high. Despite the pandemic still not being behind us and subsequent lockdowns again entering the marketplace in 2021, this has not dampened investment demand nor business sentiment and activity.

BAYSIDE COMMERCIAL SALES TURNOVER Quarterly by asset class

The commercial property market has continued to move at a rapid pace across the Bayside region during the latter parts of 2020 and into 2021. Updated analysis shows that despite the economic concerns across most property markets during the COVID-19 period of 2020, activity levels were not impacted as confidence to purchase during this time remained high, fuelled by low interest rates and cash rich buyers.

$60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000

INDUSTRIAL

RETAIL

OFFICE

RES DEV

CHILDCARE

MEDICAL

Q12021

Q42020

Q32020

Q22020

Q12020

Q42019

Q32019

Q22019

Q12019

Q42018

Q32018

Q22018

Q12018

Q42017

Q32017

Q22017

Q12017

Q42016

Q32016

Q22016

$-

OTHER

Source: Ray White Commercial, PIMS, Real Capital Analytics

With vendors becoming more cautious in coming to market, a mismatch in supply and demand was created, culminating in a period of quality results and reduced selling durations. We saw investors from further afield look towards the Bayside area for tenanted assets and actively compete for investment stock.

The affordable price point across the region of just $1.36 million in 2020 and $846,000 in 2021 has made commercial property investing more achievable for both experienced and new buyers.

During 2021 we have recorded $13.54 million in sales, 47.2% being for office assets including the recently transacted 8 Dollery Road, Capalaba. The Industrial market has remained active albeit at a reduced price range, recording 7 of the 16 sales this period or 31.3% of the total value transacted.

12 MONTHS TO 1Q 2021 COMMERCIAL TRANSACTIONS Bayside region 1.34% 13.46%

25.53%

INDUSTRIAL RETAIL OFFICE

11.44%

RESIDENTIAL DEVELOPMENT CHILDCARE AND MEDICAL OTHER

9.86%

38.37%

YEAR TO 1Q 2021 TRANSACTIONS $126.6 MILLION Source: Ray White Commercial, PIMS, Real Capital Analytics

Over the year through to the end of March 2021, we have recorded $126.59 million in commercial sales represented by 100 transactions across the Bayside region; a remarkable increase compared to the prior 12 months where 61 sales occurred totalling $73.12 million.

During 2020 we saw a rebound in confidence across the small commercial market with an increase in transactions notably in the sub $2 million price point. The quest for many buyers to secure quality, income-producing assets resulted in buyers from the region, across Queensland and interstate fuelling this increase.

While the Industrial market represents just a quarter of total transactions, the number of deals completed exceeded all other asset types at 42 with an average sale price of $770,000.

Over this period several larger retail transactions occurred accounting for close to $50 million in sales, demonstrating that buyers were undeterred by thte possibility of changing shopping habits borne from the pandemic.

Assets such as childcare facilities continue to be in hot demand; heavily yield driven, we recorded three sales across the region this 12-month period making the Cleveland precinct the most active this year.

SMALL COMMERCIAL ASSET CAPITAL VALUES Range and average $/sqm $7,000

Despite the periods of uncertainty in 2020 which saw activity stall, the commercial property market rebounded quickly across the Bayside area. This trend was not echoed in all other commercial property markets with volumes remaining up to 40% down on prior years in many major cities.

$6,000 $5,000 $4,000

The confidence demonstrated by both vendors and the small commercial private investor has been instrumental in fuelling the growth in transaction levels which has also resulted in an uptick in the capital values achieved. In 2020 we reported an 18.16% jump in capital values to $2,869/sqm, combined across all sales and asset classes.

$3,000 $2,000 $1,000 $2016

2017

2018

2019

2020

2021*

Source: Ray White Commercial

This growth is expected to continue as sales from 1Q 2021 have demonstrated an average value of $3,332/sqm (up 16.14%) driven by quality results in both office and retail asset sales which grew the upper range to $6,600/sqm. Encouragingly, the lower price range continues to increase with more affordable industrial assets now averaging capital values of $2,431/sqm in 2021, growing from $2,205/sqm in 2020.

BAYSIDE GROSS FACE RENTS 1Q 2021 By asset type ($/sqm)

There has been limited change in average rents achieved across the Bayside precinct over the past three months. The rebound in activity achieved in the latter part of 2020 has continued into the new year with confidence levels remaining high and enquiry rates elevated.

$1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $RETAIL

OFFICE

INDUSTRIAL

Source: Ray White Commercial

So far in 2021 we have seen some reduction in retail leasing transactions, however office market activity has increased as new and existing businesses look to relocate or expand, readying to flourish in a post COVID-19 economy. As such we have recorded current office rents sitting between $195/sqm and $550/sqm, with an average of $338/sqm gross, while retail remains within its broad range between $250/sqm and $950/sqm.

For the Industrial sector, we have seen rents remain stable and in line with 2020 results; demand has been highest in assets which are less than 500sqm as we saw last, year resulting in a rental range between $100/sqm and $250/sqm, with an average of $147/sqm across the region.

While we have witnessed activity levels increase across the bulk of the market, many property owners continue to be hampered with vacancies and uncertainties surrounding their assets. While demand levels have been growing, quality remains a key focus for both investors and tenants alike. Assets which have achieved the best results have been those that have continued to receive capital works to keep standards high. With interest rates expected to remain at historical lows for a prolonged period, the need for many buyers to seek out alternative investment options will keep demand for commercial assets elevated over the longer term which may pressure yields downwards and keep capital values up.

RAY WHITE COMMERCIAL BAYSIDE Nathan Moore Director nathan.moore@raywhite.com T: +61 7 3245 7199 M: +61 413 879 428

RESEARCH

Jonathon Burrowes Senior Sales & Leasing Executive jonathon.burrowes@raywhite.com T: +61 7 3245 7199 M: +61 421 383 668

Vanessa Rader Head of Research vrader@raywhite.com T: +61 2 9262 3700 M: +61 432 652 115

Benn Woods Sales & Leasing Agent benn.woods@raywhite.com T: +61 7 3245 7199 M: +61 408 689 651 NSW Ray White Commercial Eastern Suburbs raywhitecommercialeasternsuburbs.com Ray White Commercial (Greater Sydney South) raywhitecommercialnswgss.com Ray White Commercial Metropolitan Sydney raywhitecommercialnsw.com Ray White Commercial Newcastle raywhitecommercialnewcastle.com Ray White Commercial NSW - Sydney Office Leasing and Strata Sales raywhitesydneyleasing.com.au Ray White Commercial NSW-Sydney North raywhitecommercialnswsydneynorth.com Ray White Commercial South Sydney raywhitecommercialsouthsydney.com Ray White Commercial (Sydney City Fringe) raywhitecommercialsydneycityfringe.com.au Ray White Commercial Western Sydney raywhitecommercialnsw.com Ray White Retail (Sydney) raywhiteretailsydney.com Ray White Valuations raywhitevaluations.com.au NT Ray White Commercial (NT) rwcnt.com QLD Ray White Commercial Bayside raywhitecommercialbayside.com Ray White Commercial Broadbeach raywhitecommercialbroadbeach.com Ray White Commercial Cairns raywhitecommercialcairns.com Ray White Commercial Caloundra & Sunshine Coast South raywhitecommercialcaloundraandsunshinecoastsouth.com Ray White Commercial Gladstone raywhitecommercialgladstone.com Ray White Commercial Gold Coast raywhitecommercialgoldcoast.com Ray White Commercial Noosa & Sunshine Coast North raywhitecommercialnoosasunshinecoastnorth.com Ray White Commercial Northern Corridor Group raywhitecommercialnortherncorridorgroup.com.au Ray White Commercial Qld raywhitecommercialqld.com Ray White Commercial Southport raywhitecommercialsouthport.com Ray White Commercial Springwood raywhitecommercialspringwood.com Ray White Commercial Toowoomba raywhitecommercialtoowoomba.com

Ray White Commercial Townsville raywhitecommercialtownsville.com Ray White Commercial TradeCoast raywhitecommercialtradecoast.com Ray White Industrial Gold Coast raywhiteindustrialgoldcoast.com Ray White Industrial M1 North raywhiteindustrialm1north.com Ray White Industrial Milton raywhiteindustrialmilton.com Ray White Special Projects (Queensland) raywhitespecialprojects.com Ray White Valuations raywhitevaluations.com.au SA Ray White Commercial Adelaide Asset Management raywhitecommercialadelaideassetmanagement.com.au VIC Ray White Commercial Diston Asset Services raywhitecommercialdistonassetservices.com Ray White Commercial Ferntree Gully raywhitecommercialferntreegully.com Ray White Commercial Glen Waverley raywhitecommercialglenwaverley.com Ray White Commercial Oakleigh raywhitecommercialoakleigh.com Ray White Valuations raywhitevaluations.com.au WA Ray White Commercial (WA) raywhitecommercialwa.com NZ Ray White Auckland West Commercial rwcaucklandwest.co.nz Ray White Commercial Auckland rwcommercialauckland.co.nz Ray White Commercial Christchurch rwcchristchurch.co.nz Ray White Commercial Tauranga raywhitecommercialtauranga.com

The information provided in this report is in good faith and has been derived from sources deemed accurate. The reproduction of any information herewith is strictly prohibited without the prior consent of Ray White Commercial. This is general information only and should not be considered a comprehensive statement on any matter and should not be relied upon as such. Neither Ray White Commercial nor any persons involved in the preparation of this report accepts liability for its contents. All forecasts and estimates are based on a set of assumptions, which may change. Refer to the terms and conditions available on the Ray White Commercial website http://www.raywhitecommercial.com/terms–and–conditions/

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