Are you are looking to purchase a commercial property in Sydney and finding there is very limited opportunities, why not consider Brisbane.
From what we are seeing across both the Sydney and Brisbane commercial markets and all asset classes, Brisbane investments typically provide higher net yields by around 0.5% to 1.0%, and generally there are more opportunities to consider. On top of these two advantages we also feel that Brisbane is a good market to invest in for the following key reasons; there has been a lot of money invested in the road network across metropolitan Brisbane, and the zoning for most commercial properties is proactive in terms of future development.
As an introduction to the Brisbane commercial market we have provided below a brief summary of the types of returns you can expect.
Medical/Retail/Bulky Goods centres; typically these types of assets are on high exposure sites with good access and national tenants. Depending on the age of the property, the location, the extent of nationals tenants and the WALE, the net yields range between 6.5% and 7.5% with purchases in the $5 million to $15 million range. For properties below $5 million you could expect net yields of between 6.0% and 7.0%. Bulky goods properties may have a slightly higher yield than medical or retail properties.
Industrial; Due to the varying dynamics of industrial property the net yield range is a lot wider between 6.75% to 9.0%. The lower yields represent brand new tilt slab warehouses with long term leases to national tenants. The higher yields represent older buildings with short leases to local tenants. There are several locations in Brisbane that are affected by flooding which represents higher yields than 8.0% to reflect the risk.
Office; The best value at the moment is in the CBD fringe and suburban office markets. Fringe office opportunities are typically ranging between 7.0% and 8.0% depending mainly on the location, WALE and underlying development potential. Suburban office areas typically provide slighter higher yields of 7.5% to 8.5%.
Prosper Group have 10 years’ experience in assisting our clients in purchasing commercial investments in Brisbane and this knowledge and experience gives our clients the confidence to expand their investment search area and diversify their investment interest into Brisbane.
Case Study; Client expands their search area to purchase in Brisbane
Purchase price; $2.55 million
Net passing yield; 9.05%
Tenancy; 100% leased to one tenant with 3 years remaining
Property features; Older style building with clear span warehouse and main road exposure.
Our client’s original investment brief was to purchase an industrial investment in Sydney or the Hunter for under $3 million. Due to the lack of good opportunities and the low yields in these areas this client listened to our advice and expanded their search area to include Brisbane. As a result they had more opportunities to consider from new buildings with long term leases on 7% net yields to older buildings with short leases on 9% net yields. They decided to purchase a higher yielding property with the knowledge that this high return is compensation for the additional risk of an older style building and short term lease.
If you would like to find out more about investing in Brisbane and how we can assist, feel free to contact Prosper Group on 1300 664 373.