How is strata performing in Brisbane CBD in 2017?
Are you confused by the state of strata in the Brisbane market at the moment? It’s performing differently to the residential market – while house values keep going up, strata values remain constant.
Currently, strata in the Brisbane CBD is going for around $4,700 per square metre. That’s approximately the same as it was in 2015, however the number of sales completed has increased and the total sales volume has doubled. We recently sat down with the Executive of Sales and Leasing for Ray White Commercial in Queensland Nick Wedge to discuss how strata has been performing, and what’s in store heading forward.
How much strata property is sold each year?
In 2015, the total sales of office strata real estate was $14million – in 2016, however, that jumped up to $24million. Retail strata performed even better, increasing from $16million in 2015 to $25million in 2016.
“Despite sales rates remaining fairly static, it is a positive sign that there has been such a big increase in the volume of sales and number of transactions suggesting there has been an upturn in business confidence over the last 12 months,” said Nick.
“Another factor that shows signs of improvement, and that the strata market is heading back towards the peak of 2012, is that the number of days strata assets are on the market for has decreased, particularly in Q3 and Q4 of 2016 where there a was small upwards shift in demand.”
With business confidence rising and sales in higher demand, investors who currently own strata property could see increased demand for their assets. People who are looking to buy, however, should act quickly, noting the stable price of strata per square metre. That might not remain constant for much longer, and more demand means the value may go up further.
“Looking forward to 2017, I would predict similar trends to continue as the enquiry level has already been notable throughout January. If the vacancy rate tightens and the demand remains constant from owner-occupiers, this will only have positive and upward effects on capital values,” continued Nick.
Are fringe strata assets performing as strongly as CBD properties?
The fringe strata market has followed close behind its CBD counterpart, and remained constant in value but increased in sales volume through 2016. Spring Hill, Fortitude Valley, Newstead, Milton, Toowong, South Brisbane and West End (all inner fringe regions) have performed very well, with Toowong the stand-out winner from the last 12 months.
“Toowong is undergoing a generational change, with significant capital investment and over $2billion of projects underway in the inner-west,” stated Nick.
“Office strata capital values for Toowong have increased so much in 12 months (now at around $4,600 per square metre) that it is just under the CBD average rate.
“Plus, anything with a Sherwood Road address was highly sought after in 2016, and buyers made consistent offers in this space due to all the new residential and retail developments.”
Businesses looking to expand in the Brisbane market might look to the slightly cheaper fringe strata market in order to save money. While some precincts are almost as expensive as in the CBD, owner-occupiers would see some advantages to working there, including the developments that will be completed over the next few years.
However, Nick reminds potential buyers to keep a close eye on the market, as strata properties are always snapped up quickly.
“Availability of office and retail strata stock is limited and it does not change hands often. Strata generally spends very little time on the market.”
What’s driving greater sales volume around Brisbane?
Greater demand for leasing of strata properties will be a significant driver of growth in the Brisbane market – further, that’s going to encourage more and more businesses to make the move to Queensland.
“Most importantly, as the office leasing market begins to improve and vacancies begin to tighten, we will only see demand spike, particularly for owner-occupiers,” noted Nick.
“Despite low interest rates, as it currently stands, the high vacancy levels have translated into competitive leasing deals and increased incentives, as high as 40 per cent in the CBD, making leasing premises a more attractive accommodation proposal compared to the purchase of strata office suites.
“I do believe more and more businesses will choose Brisbane as a place to operate from. Basic influences outside of commercial property such as lifestyle factors, cheaper living costs compared to other state capitals and continued capital investment and development through the metropolitan area will push for an influx of people moving. It won’t just be residents, but also businesses.”
Increasing sales volume is good news for owner-occupiers of Brisbane strata property, whether in the CBD or in the fringe precincts. With the current crop of developments underway, and more people choosing Brisbane as their home, success of strata property for capital gains and rental yield is likely to improve.