Why buy a commercial property in Brisbane?

Brisbane is the place to be for commercial property investors. Picture: Getty
Brisbane is the place to be for commercial property investors. Picture: Getty

No longer a big country town, Brisbane is proving the perfect place to buy commercial property.

Compared to Sydney and Melbourne, the Sunshine State’s capital city offers investors higher rental yields, an extremely competitive market, and far fewer COVID induced lockdowns.

This is not forgetting Brisbane’s infrastructure boom with the 2032 Olympic Games set to produce a swathe of development projects worth an estimated $50 billion.

1. Cheaper prices

Nick Wedge from Colliers Brisbane City and Metro sales team said Brisbane’s commercial property prices are still comparatively cheaper than those of its eastern seaboard neighbours.

“What you can invest in here goes a lot further than what you can buy in Sydney and Melbourne,” he said.

2. Higher rental yields

On the back of its cheaper prices, Brisbane offers better rental yields than Sydney or Melbourne.

“We’re used to having yields anywhere from 5%-7% whereas in Sydney and Melbourne, yields can be anywhere between 3%-4%,” Mr Wedge said.

“Pricing and yields are a reflection of risk but at the same time, Sydney and Melbourne are deeming Brisbane pretty low risk at the moment and it’s still quite cheap in their eyes.”

Brisbane’s Howard Smith Wharves are just one of the city’s major tourist attractions. Picture: Brisbane Tourism.

3. Low stock, strong capital growth

First National Commercial principal George Koukides said Brisbane’s highly competitive market ensured commercial stock was highly sought after, with investors reluctant to sell due to low interest rates.

“We have investors ringing every day with millions of dollars to invest but the opportunities are low and there’s very strong competition for good assets,” he said.

“Not many people are selling at the moment (because) rates are low and they have been for a period of time.

“And with the huge shortage of commercial stock, if you’ve got a property, why sell it?”

Mr Wedge concurred that commercial investors with a good property had little reason to sell, particularly with interest rates so low.

“But at the same time, there’s a lot of people looking to buy for this reason,” he said.

Mr Koukides said an expectation of strong capital growth in Brisbane was another reason commercial property owners were reluctant to sell.

“They think they’ll get price gains on the back of increased rentals and continued low interest rates,” he said.

Mr Wedge added that Brisbane’s infrastructure explosion had increased the city’s chances of strong commercial appreciation.

As a result, commercial investors – particularly those from interstate – were keen to purchase Brisbane property to capture this growth.

4. Infrastructure boom

Mr Wedge described Brisbane’s infrastructure acceleration as one of the biggest the city had experienced.

Premium projects include the Queen’s Wharf casino, Cross River Rail and Brisbane Airport’s second runway, completed in June, 2020, along with a potential $1 billion third terminal.

“We’ve got over $50 billion in public and private infrastructure development projects currently occurring, and in progress, all the way through to the Olympics in 10 year’s time,” Mr Wedge said.

Brisbane’s positive commercial property outlook is based in large part on an infrastructure boom. Picture: Getty

Mr Koukides added that the Olympic Games would also create strong demand in the commercial market’s industrial and retail sectors.

Both of these sectors are already highly popular, with 18.2% of buyers searching for commercial property in Brisbane looking solely for industrial and warehouse opportunities in the 12 months up to May 2021, according to realcommercial.com.au data.

Over the same time period,  15.6% of buyers looking in Brisbane were looking at retail assets only.

5. Fewer lockdowns and sunshine

Brisbane’s relatively COVID-free situation, with far fewer lockdowns than Melbourne, was another positive for the city, according to Mr Wedge.

Mr Wedge said Brisbane now had one of the highest interstate migration rates in Australia.

“People are not only investing more in Brisbane from interstate, but they’re actually moving up here too,” he said.

“So naturally, people are investing more in commercial property in that regard.”

North Stradbroke Island is just one of Brisbane’s many coastal attractions. Picture: Getty

Mr Wedge added that Brisbane’s great weather and its location within an hour’s drive of world-class beaches and hinterlands added to its attractions, and ensured there were even more reasons to invest in the city’s commercial property.

“Brisbane has always been considered by Sydney and Melbourne as a big country town, and we’ve been overlooked,” he said.

“But we’re called Australia’s New World City for a reason.

“I think more and more people will come to Brisbane now because we’ve got all this infrastructure backing it, as well as all the things people have always come to Brisbane for, like good weather and beaches.”