Commercial Research
BETWEEN THE LINES Bayside Commercial 3Q 2021 Wrap October 2021
Commercial property has been labelled a hot commodity by owner-occupiers and private investors alike in 2021. For Queensland, strong interstate migration, stringent border policies and improving employment fundamentals have driven much enquiry from those capitalising on low interest rates and the overarching weight of funds looking for a home. This has had a positive impact for the sales market, with high demand for local assets and the limited available stock being quickly sold, and in some cases setting new benchmarks of value and yield. Private buyers have emerged from further afield, with interstate investors looking to capitalise on the improving Queensland economy based on its limited lockdowns and disruption to business compared to the other eastern states. While we saw some increases in commercial vacancies last year, it’s been encouraging to see new and emerging businesses looking to take-up space in the Bayside region. The attractive lifestyle benefits of the area have aided population growth and boosted business demand.
BAYSIDE COMMERCIAL SALES TURNOVER Quarterly by asset class
Another strong period of commercial sales in the second and third quarters of 2021 saw the updated Q2 resulting in $53.80 million changing hands. However, this figure excludes the sale of Victoria Point Town Centre which was reportedly sold for $160 million on a fully leased yield of 4.75%. This purchase by Australian REIT, HomeCo Daily Needs, is one of many convenience and large format centres the group has acquired over the past few years. The strength in this sector, together with the large land holding made this an attractive investment option.
$60,000,000 $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000
INDUSTRIAL
RETAIL
OFFICE
DEVELOPMENT
CHILDCARE
MEDICAL
Q3 2021
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
$-
OTHER
Source: Ray White Commercial, PIMS, Real Capital Analytics
Preliminary sales data for Q3 is recorded at $29.60 million. Half of all transactions were for industrial assets with an average sale price of just over $1 million, highlighting demand by owneroccupiers and private investors in this more affordable price point. The greatest demand has been in the Capalaba region, notably for industrial stock. Cleveland has seen a mix of asset sales with a high proportion of office and retail properties changing hands, highlighting a renewed strength of these asset classes which were initially impacted by COVID-19, but rebounding tenant demand has kept occupancy high.
2021* COMMERCIAL TRANSACTIONS Bayside region
4.90% 1.96%
43.56%
INDUSTRIAL RETAIL 28.77%
OFFICE RESIDENTIAL DEVELOPMENT CHILDCARE AND MEDICAL
During the three quarters of 2021 there has been $119.06 million commercial sales completed (excluding the $160 million Victoria Point Town Centre sale) across 100 transactions in the Bayside precinct. This result is already well ahead of the full year results achieved in 2016-2019, and quickly approaching the 2020 full calendar year turnover of $138.16 million. Industrial remains the most sought-after asset in this area, with owner-occupiers and smaller investors actively pursuing these assets at the sub- $1.5 million price point. With office sales only representing 6.52% of all transactions in 2020, confidence has returned for this asset class which now accounts for 28.77% of sales, made up of a combination of freehold assets and smaller strata office suites.
20.82%
2021* TRANSACTIONS $119.06 MILLION Source: Ray White Commercial *to 30 September
Last year we saw a number of bulky goods retail assets transact, growing retail sales; this year there has been an increased volume of smaller strip shops in the sub-$2 million price point. Alternative assets such as childcare and medical continue to be in strong demand by investors, and we expect to see these total volume levels increase by the end of the year.
SMALL COMMERCIAL ASSET CAPITAL VALUES Range and average $/sqm $8,000
With increased demand for investment stock comes competition impacting values. This year we have seen a rapid increase in capital values across all asset classes, as both local and interstate investors vie for quality commercial real estate. This has been instrumental in pressuring yields down, with some assets achieving yields in the sub-5.00% range. Owner-occupiers have also looked to capitalise on the low interest rate environment and the weight of funds available in the marketplace, particularly as tenant demand has improved with businesses looking to shelter from possible rent increases.
$7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $2016
2017
2018
2019
2020
2021*
Source: Ray White Commercial *30 September 2021
This year, the range in values has increased to $1,700/sqm $7,500/sqm. This broad range is indicative of the various asset types, sizes and quality. The lower end is typically representative of industrial property, while the upper range continues to be challenged, particularly for retail and medical use assets. This has brought the total average for the area to $3,632/sqm a 26.59% increase on 2020 result of $2,869/sqm.
BAYSIDE GROSS FACE RENTS 3Q 2021 By asset type ($/sqm)
2021 has shown a change in sentiment around retail and workplaces which has had a positive impact on rents. While vacancies were elevated last year, we have seen take-up levels improve with much higher occupancy rates across all asset classes. Rents remain broad given the various levels of quality, particularly for retail which can vary substantially depending on location, access, parking, quality and size, with rents ranging from $250/sqm to $1,000/sqm gross.
$1,000 $900 $800 $700 $600 $500 $400 $300 $200 $100 $RETAIL
OFFICE
INDUSTRIAL
Source: Ray White Commercial
For retail, the preference has been towards strip shops which minimise internal malls and enclosed spaces, thus viewed as a more hygienic option. The recent fire in Capalaba has resulted in tenants being forced to relocate, which has also aided in absorbing vacant stock in the market. Office space continues to trend within the $150/sqm - $550/ sqm gross range with some businesses looking for satellite locations as decentralisation from the CBD continues. Smaller stock take-up is up as tenants who were working from home look for alternative spaces. Industrial continues to show the greatest levels of activity, again in smaller industrial unit spaces of sub-500sqm. These assets can range from $100/sqm - $260/sqm gross, depending on quality, age, size, clearance and parking.
As we navigate the world with COVID-19, Queensland continues to be hindered with snap lockdowns and border and travel restrictions, with vaccination mandates the next roadblock as we head towards being ‘back to normal’. In comparison to the other eastern states, Queensland continues to be a location of attraction, with population growth fuelled by interstate migration from NSW and Victoria having a positive impact on both the residential and commercial property markets. New business starts continue to rise, and as they grow so do their accommodation needs which will further improve occupancy levels and in turn grow rents in the medium-term. Demand for commercial property is not expected to dissipate in the short-term, despite expectation that lending regulations will tighten. However, the significant volumes of equity available in the marketplace, both locally and offshore, is not expected to slow, which will continue to pressure investment into assets, further impacting yields and capital values.
RAY WHITE COMMERCIAL BAYSIDE
RESEARCH
Nathan Moore Director nathan.moore@raywhite.com T: +61 7 3245 7199 M: +61 413 879 428
Jonathon Burrowes Senior Sales & Leasing Executive jonathon.burrowes@raywhite.com T: +61 7 3245 7199 M: +61 421 383 668
Benn Woods Sales & Leasing Agent benn.woods@raywhite.com T: +61 7 3245 7199 M: +61 408 689 651
Hugh Fletcher Sales & Leasing Associate hugh.fletcher@raywhite.com T: +61 7 3245 7199 M: +61 429 583 765
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Vanessa Rader Head of Research vrader@raywhite.com T: +61 2 9262 3700 M: +61 432 652 115
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