South East Queensland Market 2016-17: This Is Your Life Pt. 2

Last week, we reflected on the South East Queensland markets too see what has passed and what may come to be. Thanks to the commentary and insights from Colliers International's SEQ experts, we were able to provide an overview of 2016 and a forecast for 2017 in the SEQ capital and metro markets.

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South East Queensland Market 2016-17: This Is Your Life]However, there's more to the SEQ, and so Colliers International in Brisbane and the Gold Coast have provided more commentary on The South East Queensland's office and retail leasing, hotels and healthcare and retirement living.
Office Leasing

By Mark McCann, National Director of Office Leasing

2016 Overview
Brisbane office leasing market outperformed many expectations in 2016. We experienced positive absorption and return of general business sentiment and confidence in the macro economy. Significant volume of leasing transactions from the Queensland State Government in the CBD and Metro regions provided much needed relief and stabilisation of the vacancy rates in both markets.

This was also a year for completion of three major CBD projects: 180 Ann Street, 480 Queen St and the Qld State Government office tower at 1 William Street – a combined total in excess of 185,000 square metres.
2017 Forecast
In 2017 we are expecting a positive absorption of space to continue across all asset grades. Corporate businesses will continue to leverage off the favourable commercial market in order to reduce their corporate footprint by way of smarter and more efficient fit-out design.

The emergence of ‘co working’ operators and growth of the education sector will continue to stabilise and positively impact on the overall vacancy in the market.

The new supply pipeline in the CBD will be constrained from 2017 to 2019. Apart from existing additions such as 310 Ann Street, there is only one development in the CBD which will be completed around the beginning of 2019. This cap on new development supply and limited existing additions, will help in reducing the overall vacancy from record levels to more historic 10 year averages.
Healthcare & Retirement Living

By Chris O’Driscoll, Associate Director of Healthcare & Retirement Living Transactions

In 2016 we have witnessed an increase in volume of ventures between sports and services clubs and retirement and aged care groups. Such ventures are likely to continue in 2017 as there are a range of benefits for both the club and the operator, some including:

• cash injection to the club

• ability for operator to leverage off existing infrastructure and amenities

• both club and operator benefit from existing members and incoming residents, and

• improved club facilities.

Land in South East Queensland is in high demand for all property asset types across the healthcare sector including: retirement villages, manufactured housing estates/land leased estates, aged care, private hospitals and medical precincts.

We are seeing sharpening discount rates and yields for operating retirement and manufactured housing estates following the deregulation of homecare.
Hotels

By Neil Scanlan, National Director of Hotel Transactions

In 2016 strong leisure markets lead to an increase in purchaser interest in Cairns and the Gold Coast. Brisbane market transactions were very quiet as the market understands the effect of new supply additions.

In 2017 the leisure markets will continue to strengthen, however they will still be below replacement value ensuring no new addition to supply occurs. Brisbane is to remain tightly held as supply/demand curve stabilises. We are likely to see demand from existing hotel investors, with hot spots being the Gold Coast and Tropical North Queensland.
Retail Leasing

By Kym Thrift, Director, Retail Leasing

2016 Overview
In 2016 we have seen a pickup in activity in Brisbane from big restaurateurs, such as Fink Group who opened Otto at 480 Queen Street. General feedback from these sophisticated restaurant groups is their confidence about Brisbane’s growth and changing culture. They are changing their mindsets about our demographics due to the planned development and strong tourism numbers.

Majority of the leasing deals done by Colliers this year were around casual dining and quick service food. Food sector is very much on the increase and there is very little activity from fast fashion groups. However the market is responding very well to international fashion brands such as H&M and Zara.
2017 Forecast
In 2017 many more entrants and brands will be announced on the back of continued development surge within the inner city ring. This rapid growth, more than the state’s average, is creating more demand which is directly impacting the retailers’ performance.

Total estimated expenditure for the CBD is $3.85 billion per annum for main trade area and it is growing. Brisbane has also experienced three per cent tourism growth year on year.

We see demand coming from well-established local operators and sophisticated restaurants from Sydney and Melbourne looking to take advantage of our urban renewal and growth. The hotspots will continue to be Fortitude Valley and Newstead due to the level of development that is happening in the area, with potentially 11,980 new apartments coming online over the next 3 years.

The population growth in this inner city region is at 8.5 per cent per annum, almost five times the growth of the Brisbane average at 1.8 per cent. Retail spending is also growing by 9 per cent annually, with casual dining spend levels at 88 per cent higher than the Brisbane average.

Ideal retail leasing opportunities in these locations are TC Beirne building refurbishment and Gasworks Stage three, which is currently under construction.