30 th Annual South East Queensland Property Overview Breakfast

Transcription

1 30 th Annual South East Queensland Property Overview Breakfast

2 SEQ Infrastructure Projects South Brisbane s east CBD Queensland Inner is currently Fringe will going see the through largest an infrastructure transformation boom since the 1970s Source: Brisbane City Council

3 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

4 Cross River Rail Cost ~ $5.4 billion Fully operational by 2024 First new inner city rail station for 120 years Source: Cross River Rail

5 Brisbane Metro Expected completion by 2023 Cost ~ $944 million 21 kilometre Turn Up and Go service Source: Brisbane City Council

6 Brisbane Live Completion by 2021/2022 Cost ~ $2 billion 17,000 seat entertainment arena Source: Brisbane Live

7 Dexus, Eagle St Pier Completion by 2026 Cost ~ $1.4 billion Redevelopment of 1.5 hectares of riverfront Source: Google Images

8 Howard Smith Wharves Completion late 2018 Cost ~ $200 million Revitalisation of a 3.43 hectare site 80% dedicated to open public space Source: Google Images

9 Brisbane Airport Second runway Completion by 2020 Cost ~ $1.3 billion Largest aviation construction project in Australia Source: Brisbane Airport Corporation

10 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

11 Cruise Terminal, Fisherman s Island Cost ~ $100 million Operational by 2019 Source: Google Images

12 Logan Motorway & M1 upgrade ~ $749 million State & Federal commitment Improvements to 8km of motorway Source: Quickway

13 Sunshine Coast Airport Expansion New runway and terminal expansion Expected completion by 2020 Source: Google Images

14 International Broadband Submarine Cable Maroochydore $35 million investment Completed 2020 Source: Sunshine Coast Council

15 Light Rail Sunshine Coast Potential to inject ~ $3.6 billion to regional economy First stage, Maroochydore to Kawana could commence 2025 Source: Sunshine Coast Council

16 Light Rail Extension Gold Coast Stage 3A Extension to Burleigh Heads Possible construction to start 2020/2021 Source: Google Images

17 SEQ Commercial Market Alistair Weir 1 November 2018

18 The Brisbane Headlines $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

19 Gross State Product (%) Qld growth back on par with southern states 8.00% Gross State Product 6.00% 4.00% 2.00% 0.00% % -4.00% Year Queensland New South Wales Victoria Western Australia Source: Australian Bureau of Statistics, Deloitte Access Economics

20 Overall national performance 6th Source: CBA State of the States October 2018

21 Consumer Sentiment Business Confidence But national confidence levels receding Business Confidence and Consumer Sentiment Optimistic Pessimistic Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Aug-18 Year Consumer Sentiment Business Confidence Source: Property Council of Australia

22 Source: Rlb.com Building activity trending down

23 Brisbane CBD Source: Herron Todd White Alistair Weir

24 Transit Centre (Cross River Rail) Demolition and Redevelopment Brisbane Live To Howard Smith Wharves Brisbane Quarter 80 Ann St Brisbane Metro Dexus Waterfront Precinct Albert St Station South Brisbane Metro Station Queen s Wharf Source: UBD Maps

25 Source: UBD Maps

26 CBD Office Markets Source: Multiplex Global

27 Still lots of space Source: Herron Todd White Alistair Weir

28 Supply/Net Absorption (sqm) Total Vacancy Rate (%) CBD office markets poised for recovery 180,000 New Supply, Net Absorption & Vacancy CBD , , , ,000 Forecast , , , , , , , ,000 Year -8.0 New Supply Net Absorption Vacancy Source: Property Council of Australia

29 Building Grade Prime vacancy drops below 10% Brisbane CBD Vacancy By Grade Darker Shade July 2018 Lighter Shade July 2017 D Grade 13.7% 16.1% C Grade 15.3% 23.8% B Grade 20.8% 20.0% A Grade 11.7% 11.6% Prime Grade 9.5% 12.1% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Vacancy (%) Source: Property Council of Australia

30 Location A long way behind Melbourne and Sydney Total Vacancies Across Australian Cities Melbourne CBD Sydney CBD 3.6% 4.6% Hobart CBD 8.1% Canberra 12.5% Brisbane CBD Adelaide CBD 14.6% 14.7% Perth CBD 19.4% Darwin CBD 21.6% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Vacancy (%) Note: As at July 2018 Source: Property Council of Australia

31 Office Trends 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

32 Fringe Markets Source: Lendlease

33 Supply/Net Absorption (sqm) Total Vacancy Rate (%) Tough 18 months for fringe office markets 100,000 80,000 60,000 40,000 20, ,000-40,000 New Supply, Net Absorption & Vacancy Fringe Year New Supply Net Absorption Vacancy Source: Property Council of Australia, Herron Todd White

34 Proposed Projects Urban Renewal Montpelier Rd Montpelier Rd, Bowen Hills Walker Corp 801 Ann St, Fortitude Valley LaSalle Fortitude Valley Metro Redevelopment Source: Google Images, Brisbanedevelopment.com, Australian Financial Review

35 Precinct Milton hits bottom Brisbane Fringe Vacancy By Precinct Darker Shade July 2018 Lighter Shade July 2017 Urban Renewal 13.7% 14.1% Toowong 11.9% 11.8% Spring Hill 16.0% 18.4% Milton 18.5% 23.6% Inner South 8.6% 9.6% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Vacancy (%) Source: Property Council of Australia

36 Kingsford Smith Drive Upgrade Eagle Farm Redevelopment Herston Quarter Millennium Square RNA Rail Station Bulimba Barracks Fortitude Music Hall Howard Smith Wharves West Village Gabba Rail Station South City Square Source: UBD Maps

37 Key Parameters for Office Markets Rentals ($/m 2 ) 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 - $315 Sales Analysis Yields (on Net Face rents) 5.50% % 6.25% % Capital Values ($/m 2 ) $8,000 - $12,000 $6,000 - $11,000 Source: Herron Todd White Research

38 Suburban Commercial Source: Google Images

39 Retail Markets Source: West Village.com

40 The struggles of bricks and motar Source: Australian Broadcasting Corporation, Inside Retail, Sydney Morning Herald

41 Revenue ($ Millions) Online retail continues upward trend $1,600 Online Revenue Growth Australia $1,482 $1,400 $1,200 $1,000 $800 $600 $715 $400 Year Source: Australian Bureau of Statistics

42 Key Retail Takeaways 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

43 Industrial Source: Port of Brisbane Website

44 Rheinmetall Tank Facility Australia Post Facility Source: Nearmap

45 Land values increasing Source: Jones Lang LaSalle

46 Total Sales Value ($Millions) Total Number of Sales Strong investor demand, limited supply 1,800 Brisbane and Outer LA's Industrial No. of Sales and Value of Sales ,600 1,400 1,200 1, Outer LA's comprise Ipswich City Council, Logan City Council, Moreton Bay Regional Council and Redland City Council Total Value Outer Sales Year Total Value Bris. Sales 0 *Note: 2018 sales are projected results. Sales can take up to six months to be recorded by DNRM. Source: PriceFinder

47 Average Indicative Yield (%) Yields compress further Industrial Yields Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Year Prime Grade Secondary Grade Source: Herron Todd White Research

48 Rent $/sqm TradeCoast & South West driving rent growth $160 $140 $120 Prime Industrial Rents $100 $80 $60 $40 $20 $0 Year Prime Net Face Prime Net Effective Source: Herron Todd White Research

49 Key Industrial Takeaways 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

50 Investment Markets Source: realcommercial.com.au

51 Investment Sales Address 260 Queen St, Brisbane City Sale Date Jul 2018 Address 7 Penong St, Westlake Sale Date Feb 2018 Address Sale Date Jul Charles Ulm Pl, Eagle Farm Sale Price $95.25M Sale Price $10.15M Sale Price $35.5M Lettable Area (m²) 12,934 WALE (by income) 1.00 years Analysed Market Yield 6.52% $/m² Lettable Area $7,318 Lettable Area (m²) 1,667 WALE (by income) 8.87 years Analysed Market Yield 7.00% $/m² Lettable Area $6,054 Lettable Area (m²) 21,100 WALE (by income) 5 years Analysed Market Yield 5.89% $/m² Lettable Area $1,665 Source: realcommercial.com.au, Google Images, CoreLogic RP Data

52 Yield/Bond Rate (%) Prime yields compress & converge 10.00% Prime Yield v Commonwealth Government 10 Year Bond Rate 9.00% 8.00% 7.00% 6.00% 5.00% 6.35% 6.25% 6.00% 4.00% 3.00% 2.00% 1.00% 2.64% Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Jul-18 Year Office Industrial Neighbourhood Retail Commonwealth Government 10 year bond Source: Herron Todd White Research

53 Childcare softening, Service Stations stabilising Address 45 Maynard St, Woolloongabba Sale Date Sept 2018 Address Sale Date Aug River Hills Rd, Eagleby Sale Price $5.805M Sale Price $12.5M Lease Term Certain years Lease Term Certain years Analysed Market Yield 5.91% Analysed Market Yield 5.73% Source: Herron Todd White Research, CoreLogic RP Data

54 The Gold Coast Source: Google Images

55 Supply/Net Absorption (sqm) Total Vacancy Rate (%) Office markets stagnant 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, ,000-10,000 New Supply, Net Absorption & Vacancy Year New Supply Net Absorption Vacancy Source: Property Council of Australia

56 Suburb Surfers Paradise and Broadbeach improve Gold Coast Vacancy by Precinct Surfers Paradise 11.3% 15.1% Southport 14.4% 14.0% Robina-Varsity Lakes 6.8% 13.3% Jul-18 Bundall 9.4% 11.5% Jul-17 Broadbeach 4.4% 8.7% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Vacancy Rate (%) Source: Property Council of Australia

57 Source: Google Images Coomera Town Centre finally opens

58 Source: Google Images Light Rail continuing to expand

59 The Sunshine Coast Source: Sunshine Coast Council

60 Source: Sunshine Coast Council

61 Source: The Guardian

62 Sunshine Plaza Source: Lendlease

63 Summary 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

64 The moral of the story in today s property markets

65 Source: Google Images Don t get caught flat footed wondering what the hell just happened!

66 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.