Market Overview - QLD
QLD Market Overview from Michael Hedger and Joe Tynan CBRE Brisbane
Travel centres and convenience-based assets are strongly in demand due to their longWALEs, secure leases with excellent corporate covenants, strategic locations, and defensive income profiles. Health investments are a rapidly growing and desirable asset class which is supported by a non-discretionary, essential-service nature. Q. How would evaluate the impact of the past eighteen months in your local market? A. Our market has, overall, experienced limited Covid-19 disruption due to the nature of assets we deal with, which the incomes are largely underpinned non-discretionary tenants. Queensland has remained comparatively economically resilient through- out Covid-19, and as a result retail trade and investor confidence have remained strong. Post the initial Covid-19 lockdowns, total sales transactions volume increased towards Q4 2020 and in Q2 2021, however has since remained constrained with fewer opportunities being formally offered throughout this year. Q. What are your expectations for the commercial property market over the next twelve months? A. We are experiencing very high levels of enquiry and significant investor demand, and as stock levels remain low, we expect to see in- creased competition to acquire premium retail assets. Assets that offer security of income, guaranteed growth via annual increases, and long leases to quality tenants will continue to be the focus of investment demand. However, the limited income disruption of these assets and the availability of record low debt means there is less motivation for vendors to sell. As such, we expect the present strong competitive environment to continue into 2022. Q. Talk us through the most significant deals you have transacted thus far in 2021. A. Neighborhood shopping centre sector - Coles Oatley in NSW at a yield of $21.75m/4.81%. Health sector - Proxima, Gold Coast, a brand new life science and health investment within the lumina precinct for $79.5m/5.65% Travel centre sector - Redbank Plains Travel Centre – a major travel centre located in greater Ipswich for $25.4m / 5.5%, as well as Servico on Olsen, a premium travel-centre asset on the Gold Coast for $21.5m / 5.15%
Q. What are the key market trends occurring throughout 2021 in your region? A. We have observed a significant compression of yields in retail investment but particularly in the neighborhood and travel centre sector where assets are underpinned by income with a focus in supermarket, fuel and convenience retail that offer longWALE and security of income with corporate covenants. We are experiencing record levels of investor demand and enquiry and with the low-rate environment and lack of retail investment opportunity in the market, we will continue to see further yield compression dependent of the asset andWALE. Q. What have been the fundamental drivers of demand amongst buyers? A. Resurgence of investor confidence following an economic recovery, particularly in Queensland, which has been largely insulated fromCovidl-19 lockdowns. Record-low cost of debt Ability for listed and unlisted funds to raise equity quickly Noticeable lack of supply of quality retail investment available to the market. Q. Reflecting on recent transactions, what has been the profile of buyers and has this shifted from previous yea rs? A. Institutional funds are becoming increasingly active with substantial acquisition mandates, where private investors had historically been the dominant purchaser profile. We have seen a transition of traditional retail investors pivot into the health sector. In the private sector we are fielding significant interest from investors in Sydney and Melbourne that are looking to acquire assets in Queensland, given its broad economic resilience in comparison to the southern states with an unprecedented emergence of new capital. Q. What types of assets are most in-demand given the current environment? A. We have observed a substantial shift in sentiment towards the neighbourhood shopping centre category, which was the most resilient during Covid-19 lockdowns due to its high weighting to supermarkets and largely uninterrupted income profiles, which therefore was the most attractive to investors.
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