Tough year ahead with some optimism

NOV 2009

HIGHER yields on real estate will be one drawcard for investors in Brisbane’s commercial market, but CB Richard Ellis (CBRE) is predicting a challenging 12 months ahead.

CBRE global research and consulting executive director Kevin Stanley, says while Queensland avoided a technical recession, the impending recovery would be more gradual than explosive and wouldn’t gather momentum until late 2010 at least.

But Stanley cites above average population growth, renewed investment in the resources sector, upcoming infrastructure investments and a strong pick-up in residential constructions as a few causes for optimism.

“The under-building in Queensland in 2009 has been quite severe and the recovery from that will give a kick to the economy in 2010 and beyond,” he says.

He says Australian superannuation funds are holding $160 billion in cash, which is double the average share, so as the $80 billion is released, about $8 billion could be directed to real estate.

CBRE director Bill Tucker says two or three listed property trusts (LPTs) and a number of wholesale funds are looking at market opportunities, highlighting a good climate for counter-cyclical buying but not enough pressure on owners to sell.

He also forecasts a vacancy rate peak of 13.7 per cent for the Brisbane CBD, pointing to national difficulties of domestic lending as a factor that will constrain the market over the next year.

“Lending is still well below average levels and will need to increase significantly before the institutional sector begins to pump,” says Tucker.

CBRE office services director Campbell Tait, says the best landlords in the market will be those who can offer attractive capital incentives to tenants, with incentives currently averaging between 20 to 30
per cent.

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