There’s a pause in the Brisbane commercial property investment market, as some investors wait to see if they can extract discounted pricing from sellers, says Knight Frank’s Justin Bond.
Bond, who is Partner and National Head of Capital Markets at Knight Frank Australia, said there was a definite pause in the Brisbane investment market despite a strong first half in 2022.
“Every group we talk to is very keen to buy an asset and deploy capital and get their returns working, but they’re very hesitant to break records,” Bond said.
“The concern that a lot of them have is that they can probably get a discount right now, but in three or six months, they’re worried that that discount might be even better at that point in time, so hence why they’re a bit reticent to act immediately.
“There are minimal signs of distress in the market and I think there will be patches of that like around the time of the global financial crisis when there was a lot more distress, but right now we’ve got equity and around the time of the GFC, we didn’t have a great deal of equity.
“Vendors – unless they are distressed – won’t be selling at distressed pricing, they will just remove assets from the market and maybe do some asset strategy exercises to make the asset more saleable and then bring it back to the market in six months.
“Don’t get me wrong though, there are some assets trading at discounts to book values and I think valuers are waiting to see those discounts so they can determine where the market actually sits.
“Hold on for the ride because I think there will be some transactions and if there is distress, I think you’ll start to see that later this year or early next year.”
Reflecting on the first half of this year, Bond said Brisbane investment activity had been on track during H1 to match last year but was now unlikely due to the pause in the market.
Recent commercial deals in Brisbane include Marquette Properties’ purchase of 12 Creek Street office in the CBD for $420 million in February and Cromwell Property Group’s sale of its 200 Mary Street asset for $108.5 million in May.
He said domestic investors had been taking advantage of a lack of competition in the market since the start of the pandemic.
“When COVID hit, foreign investors went away and domestic investors slowed down, but what the domestic investors found was that there was a lack of competition in the market and they actually started to acquire assets when there was relatively limited demand from overseas investors,” Bond said.
He said much of the capital had come from domestic investors over the past 12 months despite Singaporean and North American investors leading the way two to three years ago.
“Going forward, I expect we’ll start to see European capital come back in – the German money is still around. The Singaporean money is definitely still there, and the US,” he said.
Bond spoke at the Australian Property Institute’s 2022 Queensland Commercial State of the Market conference in August.