Offshore capital’s push into the Brisbane’s A-grade office market will further tighten yields

Major office tower transaction yields are expected to tighten this year as offshore capital increasingly sees Brisbane as an alternative to the over-priced Sydney and Melbourne markets.

CONFIDENCE: Offshore capital is increasing seeing Brisbane as a value alternative to the Sydney and Melbourne markets. (AAP Image/Claudia Baxter)

MAJOR office tower transaction yields are expected to tighten this year as offshore capital increasingly sees Brisbane as an alternative to the Sydney and Melbourne markets.

Savills state director Capital Transactions Peter Chapple said A-grade CBD office yields tracked around 6 per cent last year with expectations of further tightening.

“For 2018 we expect to see a further tightening of capitalisation rates for core assets, particularly premium ... and increased capital entering the Brisbane CBD from private investors domiciled in Asia, particularly Hong Kong and Singapore,” he said.

“As markets in Sydney and Melbourne continue to be well sought after, Brisbane will be viewed as a vital part of an Australian portfolio.”

Mr Chapple said 2017 was a year of renewed optimism for vendors and purchasers in Brisbane with $1.8 billion of office assets, of more than $20 million, sold.

“Institutional and offshore capital returned to the Brisbane market with confidence,” he said.

“European capital continues to be attracted to the yield premium on offer in Brisbane versus other east coast commercial markets and private investors are also returning to the market in search for strategic assets.”

JLL head of Sales & Investments Queensland Seb Turnbull said some of the offshore players last year included US-based Blackstone and Goldman Sachs and European players Deutsche Asset Management, BVK and M & G also surfaced.

“Brisbane experienced a clear increase in offshore capital last year and there will be continued strong investor appetite for the CBD and core near city markets,” he said.

“The outcome of the State Government election and the pending positive announcements of Cross River Rail and Brisbane LIVE projects will further enhance the appeal of Brisbane as one of Australia’s key investment markets.”