This Brisbane Sector Ready To Rocket

Get Ready… This Brisbane Commercial Sector Is About To Rocket

Last year in doing property search videos and deal reviews for my students it was obvious to me that Metro yields for the capital cities were down on the previous year.

In some cases, net yields were as low as 5%.

It was no worries for me and my students as we concentrated on other areas where the yields were much higher. The record being a yield I spotted that was in the 16% region and the highest yield bought last year by a student being around the 13% mark straight out of the box.

Not bad considering that most residential yields were closer to 2% (net yield).

But there are good signs for a resurgence in capital cities (especially Brisbane from what I can see)…

Let me show you why…

Last year QLD seemed to slow with commercial I think because of a slowing of Govt infrastructure spending and a seeming end to the mining investment boom…

But there’s always something happening … somewhere…

There are several new projects in the pipeline including a the massive Gateway Upgrade North, and the gold coast is going to be hosting the Commonwealth Games in a couple of years…
That’s going to equal a ton of new building, and related services that are going to need a home.

Deloitte Access Economics have also forecast industrial production in Queensland to rebound to better than 6% annual growth by June, with a $2 billion growth spurt (equivalent to 14%) between June 2016 and June 2018, outstripping the modest projected growth in New South Wales and Victoria.

But that’s kind of anecdotal in a way – plans and stats prove nothing.

The road to hell is paved with good intentions that say… and stats can prove anything… 98% of stats are made up on the spot.

…so I wanted to look at numbers – cause you know how much numbers excite me.

The best numbers I find is to look at what’s selling… what it’s selling for and how long it was for sale.

I found one property that was industrial (supporting the numbers I mentioned above) that sold for $6.5 Million and was on the market for less than 30 days.
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Someone was sure and in a hurry to snap that one up. It had a new five-year lease with a net rent of $610,628 which means that the new owner was looking at a yield of around 9.4%.

Not bad considering the crappy returns commercial was getting in Brisbane last year.

I can mean that he was a great negotiator, or that the seller was keen to move it on…

But for a 6.5M property to move that fast says to me that there is competition and, therefore, interest in industrial…

Obviously, 6.5m is a pretty big sum for most people, but where there are whales there are also minnows. There will be industrial commercial around if you look for it, and the same of this one will set a precedent for the yield of others…

Of course, the closer you buy to this property the more this will have an effect, and you always need to check the cap rate of the area you are looking to buy, but sales this big tend to make a splash if the mood has been quiet for a time.

Savills says foreign investor and private investor purchaser categories were the most active in the industrial market last year, buying 41% and 21% respectively of properties sold.

This means if you are in the big end you are competing against some big money, but if you are buying in the less than $1M range, you’d probably fall under the radar somewhat.

In Brisbane, the yields on average were in the 6.5% to 7.5% range, which generally I would not bother with, but this sale is a strong indicator that those numbers are going to change.

All the same usual rules apply…

i.e. you can’t take this as a recommendation, you’ve got to do your due diligence, and all decisions are your own…

But you’ve got to admit – these numbers are pretty interesting and probably worth investigating further.

The one thing I will say is this…

I’d be looking for industrial with an upside like unused land… if you can build and add more industrial buildings to rent out then, you become the supplier to all these foreign companies buying up property because of the state of the Aussies dollar.

That will allow you do not only make passive income from leasing the property but also boost your equity in a market that seems to be heating up.

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