30 annual south east queensland property overview breakfast · queen’s wharf • opening 2022 •...

30th Annual South East

Queensland Property

Overview Breakfast

SEQ Infrastructure Projects South east Queensland is currently going through an

infrastructure boom

Brisbane’s CBD and Inner Fringe will see the largest

transformation since the 1970s

Source: Brisbane City Council

Queen’s Wharf

• Opening 2022

• Cost ~ $3.6 billion

• 26 hectare site

• 2,000 residential

apartments & 1,000+

hotel rooms

Source: Queen’s Wharf Consortium

Cross River

Rail


• Fully operational by

2024

• First new inner city rail

station for 120 years

Source: Cross River Rail

Brisbane

Metro

• Expected completion

by 2023

• Cost ~ $944 million

• 21 kilometre ‘Turn Up

and Go’ service

Source: Brisbane City Council

Brisbane Live

• Completion by

2021/2022

• Cost ~ $2 billion

• 17,000 seat

entertainment arena

Source: Brisbane Live

Dexus,

Eagle St Pier

• Completion by 2026


• Redevelopment of

1.5 hectares of

riverfront

Source: Google Images

Howard Smith

Wharves

• Completion late 2018

• Cost ~ $200 million

• Revitalisation of a

3.43 hectare site

• 80% dedicated to open

public space


Brisbane

Airport

• Second runway

• Completion by 2020


• Largest aviation

construction project in

Australia

Source: Brisbane Airport Corporation

Woolloongabba

Precinct

• Cross River Rail station

operable by 2024

• Potential to attract ~

$1.5 billion of private

investment

• Rejuvenation of a

6.5 hectare site

Source: Brisbane City Council & Qld State Government

Cruise

Terminal,

Fisherman’s

Island • Cost ~ $100 million

• Operational by 2019


Logan

Motorway &

M1 upgrade

• ~ $749 million State &

Federal commitment

• Improvements to 8km

of motorway

Source: Quickway

Sunshine

Coast Airport

Expansion

• New runway and

terminal expansion

• Expected completion

by 2020


International

Broadband

Submarine

Cable –

Maroochydore

• $35 million investment

• Completed 2020

Source: Sunshine Coast Council

Light Rail –

Sunshine

Coast

• Potential to inject

~ $3.6 billion to

regional economy

• First stage,

Maroochydore to

Kawana could

commence 2025


Light Rail

Extension –

Gold Coast

• Stage 3A – Extension

to Burleigh Heads

• Possible construction

to start 2020/2021


SEQ Commercial Market

Alistair Weir 1 November 2018

• $45 billion in committed infrastructure spending across next four years to

drive population and employment, and property markets

• Substantial private development in pipeline

• Reshaping of the Brisbane CBD and inner fringe

• Mid and outer suburbs face increasing congestion issues

The Brisbane Headlines

-4.00%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

2012 2013 2014 2015 2016 2017 2018

Gro

ss S

tate

Pro

du

ct

(%)

Year

Gross State Product

Queensland New South Wales Victoria Western Australia

Source: Australian Bureau of Statistics, Deloitte Access Economics

Qld growth back on par with southern states

Source: CBA State of the States October 2018

Overall national performance 6th

-40.00

-30.00

-20.00

-10.00

0.00

10.00

20.00

30.00

40.00

60.00

70.00

80.00

90.00

100.00

110.00

120.00

130.00

140.00

Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18

Bu

sin

ess C

on

fid

en

ce

Co

nsu

me

r S

en

tim

en

t

Year

Business Confidence and Consumer Sentiment

Consumer Sentiment Business Confidence

Optimistic

Pessimistic

Source: Property Council of Australia

But national confidence levels receding

Source: Rlb.com

Building activity trending down

Brisbane CBD

Source: Herron Todd White – Alistair Weir

Queen’s Wharf

Albert St

Station

Transit Centre

(Cross River Rail)

Demolition and

Redevelopment

Dexus

Waterfront

Precinct

Brisbane

Live

South

Brisbane

Metro

Station

Brisbane

Quarter

80 Ann St

Brisbane Metro

To Howard Smith Wharves

Source: UBD Maps

Source: UBD Maps

CBD Office Markets Source: Multiplex Global

2017 2018

Source: Herron Todd White – Alistair Weir

Still lots of space

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

-80,000

-60,000

-40,000

-20,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

Tota

l V

ac

an

cy R

ate

(%

)

Su

pp

ly/

Ne

t A

bso

rpti

on

(sq

m)

Year

New Supply, Net Absorption & Vacancy CBD

New Supply Net Absorption Vacancy

Forecast


CBD office markets poised for recovery

12.1%

11.6%

20.0%

23.8%

16.1%

9.5%

11.7%

20.8%

15.3%

13.7%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Prime Grade

A Grade

B Grade

C Grade

D Grade

Vacancy (%)

Bu

ild

ing

Gra

de

Brisbane CBD Vacancy By Grade Darker Shade July 2018

Lighter Shade July 2017


Prime vacancy drops below 10%

Note: As at July 2018

21.6%

19.4%

14.7%

14.6%

12.5%

8.1%

4.6%

3.6%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Darwin CBD

Perth CBD

Adelaide CBD

Brisbane CBD

Canberra

Hobart CBD

Sydney CBD

Melbourne CBD

Vacancy (%)

Lo

ca

tio

n

Total Vacancies Across Australian Cities


A long way behind Melbourne and Sydney

• Smaller fully fitted out work spaces becoming prevalent

• Increasing need for better facilities: bike and shower facilities, boardrooms,

meeting rooms, child care, cafes, concierge

• Co-working spaces expanding…We Work, Christies, Regus, Hub

• Ongoing move towards larger floor plates for major tenancies

• Energy efficiency

Office Trends

Fringe Markets Source: Lendlease

-8.0

-6.0

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20.0

-40,000

-20,000

0

20,000

40,000

60,000

80,000

100,000

Tota

l V

ac

an

cy R

ate

(%

)

Su

pp

ly/

Ne

t A

bso

rpti

on

(sq

m)

Year

New Supply, Net Absorption & Vacancy Fringe


Source: Property Council of Australia, Herron Todd White

Tough 18 months for fringe office markets

Walker Corp

LaSalle

Montpelier Rd

801 Ann St,

Fortitude Valley

66 – 69

Montpelier Rd,

Bowen Hills

Fortitude Valley Metro

Redevelopment

Source: Google Images, Brisbanedevelopment.com, Australian Financial Review

Proposed Projects – Urban Renewal

9.6%

18.5%

18.4%

11.8%

14.1%

8.6%

23.6%

16.0%

11.9%

13.7%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Inner South

Milton

Spring Hill

Toowong

Urban Renewal

Vacancy (%)

Pre

cin

ct

Brisbane Fringe Vacancy By Precinct

Darker Shade July 2018

Lighter Shade July 2017


Milton hits bottom

West Village

Gabba Rail

Station

Herston Quarter

Fortitude

Music Hall

Kingsford Smith Drive Upgrade

Millennium Square

RNA Rail

Station

Eagle Farm

Redevelopment

Bulimba Barracks

Howard

Smith

Wharves

South City Square

Source: UBD Maps

Rentals ($/m2)

Brisbane CBD (A Grade)

Brisbane Fringe (A Grade)

Gross Face Rents $650 - $700 $550 - $620

Incentives 35% - 40% 35% - 40%

Gross Effective Rents $635 - $740 $390 - $450

Outgoings $130 - $195 $110 - $135

Net Effective Rents $365 - $430 $280 - $315

Sales Analysis

Yields (on Net Face rents) 5.50% - 6.00% 6.25% - 6.75%

Capital Values ($/m2) $8,000 - $12,000 $6,000 - $11,000

Source: Herron Todd White Research

Key Parameters for Office Markets

Suburban Commercial Source: Google Images

Retail Markets Source: West Village.com

Source: Australian Broadcasting Corporation, Inside Retail, Sydney Morning Herald

The struggles of bricks and motar

$715

$1,482

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Re

ven

ue

($

Mil

lio

ns)

Year

Online Revenue Growth Australia

Source: Australian Bureau of Statistics

Online retail continues upward trend

• Generally stagnant retail sales …rents stagnant or declining in many centres

• CBD Retail Flat

• Major retailers under pressure…Target, Myer, David Jones rationalising

stores

• Online expenditure continuing to grow strongly…mobile purchases 58% of

online sales

• Buy Now Pay Later (BNPL) growing strongly

• Yields stable for CBD, Major Regional, Neighbourhood and Convenience

centres, softening for Sub- Regional

Key Retail Takeaways

Industrial Source: Port of Brisbane Website

Rheinmetall Tank Facility

Australia Post Facility

Source: Nearmap

Source: Jones Lang LaSalle

Land values increasing

0

50

100

150

200

250

300

350

400

450

500

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Tota

l N

um

be

r o

f S

ale

s

Tota

l S

ale

s V

alu

e (

$M

illi

on

s)

Year

Brisbane and Outer LA's Industrial No. of Sales

and Value of Sales 2008-2018

Total Value Outer Sales Total Value Bris. Sales

Outer LA's comprise Ipswich City Council, Logan City

Council, Moreton Bay Regional Council and Redland City

Council

*Note: 2018 sales are projected results.

Sales can take up to six months to be recorded by DNRM.

Source: PriceFinder

Strong investor demand, limited supply

6.35

7.95

6.00

6.50

7.00

7.50

8.00

8.50

9.00

9.50

10.00

10.50

11.00

Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18

Ave

rag

e I

nd

ica

tive

Yie

ld (

%)

Year

Industrial Yields

Prime Grade Secondary Grade


Yields compress further

$0

$20

$40

$60

$80

$100

$120

$140

$160

Re

nt

$/

sq

m

Year

Prime Industrial Rents

Prime Net Face Prime Net Effective


TradeCoast & South West driving rent growth

• Vacancies declining but incentives increasing. Up to 20% for major

institutional grade premises

• Land supply diminishing. Big growth in land rates in prime areas

• Yields still tightening for strong properties

• Secondary areas stable - limited investor appetite

• TradeCoast and southern corridor performing best

• Rents starting to edge up in both prime and secondary areas

Key Industrial Takeaways

Investment Markets Source: realcommercial.com.au

Address 71 Charles Ulm Pl,

Eagle Farm

Sale Date Jul 2018

Sale Price $35.5M

Lettable Area (m²) 21,100

WALE (by income) 5 years

Analysed Market Yield 5.89%

$/m² Lettable Area $1,665

Address 7 Penong St,

Westlake

Sale Date Feb 2018

Sale Price $10.15M


WALE (by income) 8.87 years



Address 260 Queen St,

Brisbane City

Sale Date Jul 2018

Sale Price $95.25M


WALE (by income) 1.00 years



Source: realcommercial.com.au, Google Images, CoreLogic – RP Data

Investment Sales

6.00%

6.35%

6.25%

2.64%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

10.00%

Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18

Yie

ld/

Bo

nd

Ra

te (

%)

Year

Prime Yield v Commonwealth Government 10 Year Bond Rate

Office Industrial Neighbourhood Retail Commonwealth Government 10 year bond


Prime yields compress & converge

Source: Herron Todd White Research, CoreLogic – RP Data

Address 45 Maynard St,

Woolloongabba

Sale Date Sept 2018

Sale Price $5.805M

Lease Term Certain 19.78 years


Address 19-29 River Hills Rd,

Eagleby

Sale Date Aug 2018

Sale Price $12.5M

Lease Term Certain 13.61 years


Childcare softening, Service Stations stabilising

The Gold Coast


-6.0

-4.0

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6.0

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26.0

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Tota

l V

ac

an

cy R

ate

(%

)

Su

pp

ly/

Ne

t A

bso

rpti

on

(sq

m)

Year

New Supply, Net Absorption & Vacancy



Office markets stagnant

8.7%

11.5%

6.8%

14.0%

15.1%

4.4%

9.4%

13.3%

14.4%

11.3%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

Broadbeach

Bundall

Robina-Varsity Lakes

Southport

Surfers Paradise

Vacancy Rate (%)

Su

bu

rb

Gold Coast Vacancy by Precinct

Jul-18

Jul-17


Surfers Paradise and Broadbeach improve


Coomera Town Centre finally opens


Light Rail continuing to expand

The Sunshine Coast


Source: The Guardian

Sunshine Plaza

Source: Lendlease

• Huge disruption across the Brisbane CBD in the next 5 years. Thereafter,

both CBD and Fringe areas likely to grow strongly

• Office markets to strengthen, first in CBD, then to Fringe

• Industrial to continue to strengthen

• Greater delineation between good and secondary retail

• Yields broadly to flatten out or soften. Yield driven capital growth cycle is

over

Summary

The moral of the story in today’s property

markets…

Don’t get caught flat footed wondering what

the hell just happened!


Disclaimer

The information contained in this report is provided in good faith and

has been derived from sources believed to be reliable and accurate.

However, the report is not intended to be comprehensive or render

advice and neither Herron Todd White nor any persons involved in the

preparation of this report accepts any form of liability for its contents.

This report has copyright and cannot be reproduced without written

permission of Herron Todd White.

30 annual south east queensland property overview breakfast · queen’s wharf • opening 2022 •...

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