The Brisbane property market has been growing for the last five years - its growth keeping pace with Melbourne and Sydney. More people are seeing this as the best place to invest in property, but what sort of property?
Homes in Sydney and Melbourne are becoming far too expensive for many people to even consider buying. In the Sunshine State, however, there are plenty more affordable options - not just in the residential sector.
Strata and office real estate in Brisbane is a possibility for investment right now. Read on to find out more.
Why should you invest in offices?
In 2014, the Brisbane CBD office market had a total value of over $12million. In 2015, that shot up to almost $14million, but through 2016, it has more than halved, to $6.5million. This drop has been caused by a number of factors:
- Total office vacancies have risen to 16.9 per cent.
- In response to that, investor activity has declined.
- That has lowered the total value of each square metre of office space to $4,618 - far below the high of above $8,000 per square metre in 2012.
- Continuing project completions that compete with existing office and strata properties mean values could continue falling for some time.
Investors have been willing to sit and wait for the right home to come onto the market, without even considering what impact a commercial investment could have on their portfolio.
If an investor buys a great building in a central location and it's fitted out well, it's unlikely that they'll struggle to find tenants. Buying an entire commercial office building is an expensive outlay, however. Only large property investors with a long-term vision will see the best returns with an office investment. There is always the chance that some offices will become a part of the vacancy statistics, though.
Has strata been outperforming commercial overall?
The broader Brisbane CBD office market has seen increases in vacancy rates since at least July 2012. Back then, the vacancy rate was around 8 per cent. The year after, it jumped to 13 per cent, and now sits at 16.9 per cent. However, strata vacancies have dropped in the past two years. In July 2014, the vacancy rate was 11 per cent. One year later, it was just 9 per cent, which has remained steady for 18 months.
There's good reason for this, too. These strata offices are generally below A-grade, so don't necessarily cost as much as higher-grade spaces. With lots of people projected to move into the Sunshine State to take advantage of the Advance Queensland business initiative, having a good office is going to be a key to success.
There's more than $400million in business investment from the state government up for grabs. That's split between existing businesses and start-ups, particularly those looking to take their product to new markets, whether local or international.
These investments could be used for any sort of payment, including for small-business owner-occupiers who want to gain stability in their office space by not having to pay a lease. Rather, as they own their office, they essentially have the control, so won't be at the mercy of investors or developers who want to increase lease costs and other overheads.
As more and more businesses take advantage of the investment plan and move into the Brisbane CBD, purchasing strata property might be their best option.
The market for buying a strata property is more open than people might think, too.
Are strata and commercial properties easy to buy?
Market movements in the past 12 months show that offices have not been bought or sold very much. That doesn't mean the environment is tough to buy in, however. It's not a competitive landscape, and buying a strata property could be the cheapest option.
In 2014, the total proportion of retail strata sales in the property market was 37.1 per cent. A year later, it was down slightly to 36.5 per cent, however in 2016, it's just 20.1 per cent. There could be a few explanations for this:
- People who currently own commercial strata properties are unwilling to sell, as they want to see how the business landscape develops;
- Current strata owners are happy to sit and wait on their investments until the market turns around and they can make better capital gains; or
- There is a low turnover of commercial strata because businesses have not yet made the move to take advantage of the Advance Queensland fund.
The high vacancy rates of the broader commercial market should not act as a deterrent to potential buyers, nor should the decrease in value per square metre of office space. Both of those factors could work in favour of the buyer - particularly in the relatively open strata market for owner-occupier businesspeople.
