Asian investors zero in on Brisbane office market
Brisbane’s office towers are on the radar of international investors in a fundamental shift in favour of the Queensland capital as offshore players look to invest ahead of an eventual pick-up in the leasing market.
Singapore groups AEP Investment Management and Wee Hur Holdings last year swooped on major towers in the central business district, and deep-pocketed fund managers, including US-based Hines and Pramerica, have also invested.
Knight Frank managing director, Queensland, Ben McGrath says international investors are discovering Brisbane, boosting already strong prices amid a high-vacancy market.
International appeal: Chinese still keen to buy our property
“When we went to Asia most of the investors were saying, ‘We’re looking at Sydney or Melbourne’,” McGrath says.
“Now they’re saying, ‘We want to look at Brisbane’. Brisbane is regarded as having a lot of liquidity. It’s not going to be difficult to divest. It’s a fundamental shift in terms of the market,” he said.
It’s now a high vacancy rate and that is bad news. But that brings opportunity
A Colliers International report found $648.9 million of commercial property had sold in Brisbane in the year to September 30. Prominent campaigns, including the forthcoming $200 million-plus sale of ISPT’s Green Square South Tower to financial services company Challenger, acting on behalf of Korean interests, highlight the trend.
The tower is fully leased to the Brisbane City Council and is in keeping with the desire of offshore investors to buy government-leased assets.
The sales of these well positioned buildings have been achieved despite vacancy rates in the city of almost 20%.
“These transactions further exemplify the fierce competition for well-balanced assets when they’re brought to market,” the Colliers International report says.
JLL Australia chief executive Stephen Conry says there are strong opportunities in the Brisbane market.
“The gap between the yield of quality assets in Sydney versus Brisbane has widened. The 10-year average is about 70 basis points, it’s now about 125,” he says. “It’s now a high vacancy rate and that is bad news. But that brings opportunity.”
Now they’re saying, ‘We want to look at Brisbane’. Brisbane is regarded as having a lot of liquidity.
Consolidated Properties founder Don O’Rorke says any buildings that have strong income are “hotly contested” despite the record-high vacancies.
“The market is a bit dysfunctional in that the tenant market is characterised by high incentives and low rents, and the owner market is hotly contested,” he says. “There’s a little bit more to go in asset growth.”
In his report, Colliers International research manager Peter Willington found investment activity continuing after a strong second half of 2015, with Investa’s sale of Kings Row in Milton to Taiwanese-backed Shayher Group a notable deal.
This article originally appeared on www.theaustralian.com.au/property.