Strong investment appetite drives Q3 sales activity

Queensland office investment volumes have continued to soar in 2018 with Savills Research recording a strong uplift in activity during the third quarter.

Brisbane witnessed a flurry of activity in Q3 with $956 million worth of sales recorded within the CBD compared to $432 million set in Q2. Savills Research has recorded 13 assets transacting to the end of September compared to 12 sales for the full year in 2017.

Savills Managing Director, Anthony Ott highlighted that a key trend has been the continued increase in activity from offshore capital investing into the Brisbane office market.

“Over the course of the year the market has witnessed increased investment appetite and purchasing activity by offshore groups, particularly Singaporean-based investors.

“This is highlighted by the fact that 77% of assets sold in the Brisbane CBD to the end of the third quarter have been secured by foreign investors. This result is in comparison to 65% for the full year 2017 and 55% for the full year 2016,” Mr Ott said.

Considerations such as stronger net migration to Queensland, increased job creation, and a positive outlook on planned infrastructure spend are all positive indicators of an improving economy which investors are recognising.

“Brisbane’s office investment volumes have been trending higher since 2009 despite unfavourable levels of office vacancy and stagnant rental growth. However, we are now seeing positive trends including a reduction in vacancy, evidence of face rental growth, and stronger economic conditions in Queensland.

“These factors, together with the strong relative value proposition in contrast to other key markets such as Sydney and Melbourne will continue to drive strong demand from both foreign and domestic capital.

“We expect this sentiment to be reinforced by strong sales volumes in Q4, supported largely by Charter Hall’s most recent acquisition of 61 Mary Street from QIC for $275m, and a number of other CBD assets expected to change hands between now and the end of the year,” Mr Ott said.

Savills Research has identified strong activity emerging in the Fringe office market during the second half of the year. While sales volumes above $10 million were slower in the first half of the year, there has been a marked increase in activity during Q3 and Q4. In the first nine months of 2018, circa $447 million worth of transactions were recorded, of which $264 million was concluded during Q3. In the corresponding period last year, more than $725 million worth of assets transacted.

A strong finish to the year is underway with a further $500 million being exchanged so far in Q4 with the sale of 100 Skyring Terrace, 825 Ann Street and 100 Brookes Street.

Mr Ott said that the slowdown in the fringe and suburban markets in the first nine months of the year was more a reflection of the relative lack of investment grade assets for sale and not because of any adverse investor sentiment.

The most recent acquisitions by Centuria and Growthpoint in Fortitude Valley supports the growing interest from investors looking to deploy capital into the Brisbane office market and we expect this trend to continue into the new year.