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Brisbane commercial assets continue to lead the way
Commercial investors in Brisbane continue to reap the benefits of the city’s strong yields, leading the way nationally across retail, office and industrial assets.
According to REA’s latest Commercial Yield Report, transaction activity rose over the June quarter, despite interest rate increases weighing on buyer demand.
The report found that, broadly, yields declined across industrial and retail assets in the June quarter, while office recorded mixed results.
REA senior economist Anne Flaherty said that the recently announced taxation changes had provided a significant boost to the commercial sector, bringing more interest.
“One tailwind for the sector has been the sweeping tax changes brought in following the federal budget, which retained negative gearing benefits for commercial property while removing them for residential,” Flaherty said.
“Over time, this could translate into increased demand for commercial property, particularly once funding costs are in less restrictive territory.”
The report found that Brisbane was the most attractive city for commercial investment, leading the capital cities across industrial, office and retail assets for gross yields.
Sydney recorded the lowest yields across industrial and office assets among the capitals, while Melbourne’s retail market saw the lowest returns across the class.
Western Australia saw the highest gross yields across both industrial and office assets, while NSW led the way in the retail sector.
Flaherty said that while industrial yields had held stable across most markets, it was the only property type where yields were down across the board compared to 12 months ago.
Similarly, she said that office yields had shown the greatest variation, softening in Melbourne and Perth while sharpening in Brisbane, Adelaide and Sydney.
“This mixed movement is even more stark when comparing year-on-year, reflecting the shifting risk profiles of office markets around the country.”
She said that retail yields showed the strongest compression over the quarter, driven by a 25 bp drop in Brisbane, 18 bp in Adelaide and 10bp in Melbourne.
“However, they remained unchanged in Sydney and Perth.”
“Retail yields remain notably higher than office and industrial yields in every capital city, indicative of the higher perceived risk in the sector,” Flaherty concluded.
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