Bayside EOFY 2020/21 Wrap

Commercial Research

BETWEEN THE LINES Bayside Commercial End of Financial Year Wrap July 2021

The last 12 months has yielded great results for the Bayside Region, despite the uncertainties which COVID-19 brought to the start of 2020. While many businesses and landlords have had to navigate various lockdowns and changes to trade restrictions impacting their bottom line, the resilience of the commercial property market has been outstanding. Fuelled by low interest rates and diversification, we’ve seen a dramatic increase in demand for commercial assets, notably in the smaller sub-$5 million price range and fully tenanted investments. After a slow start this has positively impacted turnover levels and capital values, with new yield benchmarks set for investors and continued signs of improvement for the rental market.

BAYSIDE COMMERCIAL SALES TURNOVER Quarterly by Asset Class

Over the last 12 months we’ve seen activity levels rebound, with restrained appetite to purchase commercial property created by the impacts of COVID-19 only short lived. During the 2020/21 financial year there has been $116.96 million worth of commercial property change hands in the Bayside region, up 10.81% on the prior year.

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

INDUSTRIAL

RETAIL

CHILDCARE

OFFICE MEDICAL

Q2 2021

Q1 2021

Q4 2020

Q3 2020

Q2 2020

Q1 2020

Q4 2019

Q3 2019

Q2 2019

Q1 2019

Q4 2018

Q3 2018

Q2 2018

Q1 2018

Q4 2017

Q3 2017

Q2 2017

Q1 2017

Q4 2016

Q3 2016

$-

DEVELOPMENT OTHER

Source: Ray White Commercial, PIMS, Real Capital Analytics

Demand for stock continues to outstrip the supply of assets on the market as both private investors and owner-occupiers actively seek commercial investment properties, notably in the sub- $1 million price range. After trepidation by property owners to put their properties on the market, we’ve seen more vendors looking to take advantage of the current property fundamentals, resulting in increased capital values and yields remaining competitive.

Industrial continues to be the most active asset class across the region, with a current average sale price of $840,000 in 2021. This highlights the attractiveness of both the asset class and the price point, as cashed-up buyers and improved lending conditions make purchasing in this lower price point more achievable.

Despite uncertainties in both the retail and office asset classes, we continue to see competition to secure quality stock, again driven by lower price points averaging $1.24 million and $901,000 respectively this year.

2020/21 TURNOVER BY ASSET CLASS Capalaba

OFFICE 17.62%

INDUSTRIAL 23.68%

Bolstered by continued robust investment into showroom retail assets, notably in the Redland Bay Road precinct, we’ve recorded $43.47 million turnover during 2020/21 across the Capalaba region, an increase of 22.23% on the prior year. Retail assets accounted for close to 50% of all sales over the last 12-month period, with a number of sales during late 2020 propping up the average sale price in Capalaba to over $2.1 million.

Industrial sales have been plentiful; however, all sit below $1 million, with an average sale price of only $541,000 making it an attractive investment option, particularly for first-time commercial investors. As a result, we’ve seen some growth in capital values, averaging $2,240/sqm in 2021 compared to $1,876/sqm achieved in late 2020.

RETAIL 58.70%

2020/21 TURNOVER: $43.47M Source: Ray White Commercial

Limited office transactions have occurred this year, the largest being 8 Dollery Road which attracted strong interest from both local and interstate private investor groups as the appetite for tenanted investments continues to grow across all price points, selling on an attractive 6.00% net yield.

CONTINUING FROM RESULTS IN LATE 2020, WE RECORDED A STRONG INCREASE IN LEASING ACTIVITY, FROM BOTH ENQUIRIES FOR NEW BUSINESSES TO THE AREA AND EXISTING OCCUPIERS RECONSIDERING THEIR ACCOMMODATION REQUIREMENTS AND MAKING THE MOST OF COMPETITIVE RENTAL RATES AND INCENTIVES ON OFFER.

2020/21 TURNOVER BY ASSET CLASS Cleveland RETAIL 12.65%

OFFICE 11.66%

DEVELOPMENT 8.31%

INDUSTRIAL 49.46% CHILDCARE 17.92%

2020/21 TURNOVER: $53.12M Source: Ray White Commercial

The Cleveland region has recorded $53.12 million in sales during this financial year, up 4.63% on last year with the profile of asset types remaining relatively static.

Industrial continues to account for nearly half of all transactions with an average sale price just over $1 million. Capital values for this precinct have a much wider range of values from $1,400/sqm to $3,000/sqm+. While tenanted investments are in high demand, we’ve seen many buyers move up the risk curve to successfully secure property, with assets either vacant, partially vacant or under-rented still attracting enquiry as buyers look to longer-term potential or opportunities during this time of low interest rates.

Two childcare sales were transacted in late 2020 accounting for $9.52million, while development stock (both commercial and residential) added $4.42 million to total sales.

Office suite sales have been consistently strong, with the average $562,000 price making it an attractive option, notably for local buyers. Similarly, smaller retail assets saw an average sale price of $671,850, accounting for a similar proportion of total turnover.

2020/21 TURNOVER BY ASSET CLASS Wynnum/Manly OFFICE 28.50%

The Wynnum/Manly precinct has also seen an uptick in sales activity during 2020/21, up 12.63% on last year’s results to $20.37 million.

DEVELOPMENT 5.92%

INDUSTRIAL 6.60%

RETAIL 58.98%

Dominated by retail sales including showroom facilities, we’ve seen sales with yields as low as 1.50% for assets which are not fully tenanted as buyers look to the potential to increase returns, with fully occupied yields ranging up to 7.00%.

Retail sales this year have an average of $1.5 million with capital values of over $4,000/sqm commonplace, growing from the $3,450/sqm recorded during the prior financial year.

Smaller office sales have increased this period accounting for 28.50% of the total turnover. With an average sale price of $830,000 these remain attractive to the sub-$1 million buyer segment which continues to grow.

Industrial and development sales have been limited this year, together representing an eighth of all sales collectively.

2020/21 TURNOVER: $20.37M Source: Ray White Commercial

It’s been a tumultuous 2020/21 financial year, with highs and lows as we navigated through a post COVID-19 economy.

While the volume of sales increased, stock levels remain well below enquiry levels as we continue to see both local and interstate investors seek out quality assets across the region. Capital values have seen some good appreciation and are expected to continue if demand levels remain elevated, which is supported by interest rates projections showing continued lows over the medium-term. While the move in and out of lockdown has a devastating impact on small business, we’re pleased that vacancies across the region have seen limited negative movement in the past 12 months, with leasing deals continuing to transact.

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

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The information provided in this report is in good faith and has been derived from sources deemed accurate. The reproduction of any information here with 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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