metropolitan office market analysis -...

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Report for Centuria Property Funds Limited

Metropolitan Office Market Analysis 1231 Sandgate Road, Nundah QLD

21 April 2017

Colliers International Centuria Property Funds Limited 1231 Sandgate Road, Nundah QLD

Craig Clayworth

National Director, Valuations

Colliers International

Level 30, One One One

111 Eagle Street, Brisbane

Direct +61 7 3370 1724

Mobile + 61 423 828 236

[email protected]

Carl Knaggs

Director, Consultancy




Direct +61 7 3370 1728

Mobile + 61 416 765 636

[email protected]

David Skerrett

Associate Director, Consultancy




Direct +61 7 3370 1730

Mobile +61 452 335 483

[email protected]

Lynn Johnsen

Senior Consultant, Consultancy




Direct +61 7 3370 1793

Mobile +61 431 268 203

[email protected]

Sophie Tieman

Assistant Valuer, Valuations




Direct +61 7 3370 1725

Mobile +61 401 884 167

[email protected]

mailto:[email protected]






Contents 01 INTRODUCTION 1

02 KEY FINDINGS 3

03 LOCATIONAL ANALYSIS - NUNDAH

3.1 Locational Profile 6

3.2 Demographic Pofile 9

04 ASSET OVERVIEW

4.1 Site Details 13

4.2 Building Characteristics 13

4.3 Tenants 14

4.4 SWOT Analysis 14

05 BRISBANE OFFICE MARKET OVERVIEW

5.1 Brisbane CBD Office Markets 16

5.2 Brisbane Fringe Office Markets 18

5.3 North Brisbane Metropolitan Office Market 21

5.4 Competitive Analysis 25

5.5 Indicative Leasing Strategy (Hypothetical Scenario) 27


INTRODUCTION

Colliers International Centuria Property Funds Limited 1231 Sandgate Road, Nundah QLD 1

Introduction Colliers International Consultancy Pty Ltd (Colliers) has been commissioned by Centuria Property Funds Limited

(Centuria) to undertake an analysis of the Brisbane office market as it relates to the purchase of 1231 Sandgate

Road, Nundah (Property).

Purpose

The purpose of this report is to provide market research and commentary for Centuria which sets out the following:

Locational characteristics of Nundah;

Asset overview;

An overview of the Brisbane office markets and specifically Brisbane CBD, Inner-City and North Brisbane

Office markets;

Competitor analysis including recent metropolitan office deals (leasing);

Hypothetical leasing strategy; and

Summary findings about current office market environment.

Assumptions

In undertaking this analysis, we have been instructed by Centuria and have based and relied on the following broad

assumptions in preparing this report:

That the Property is fully tenanted with a WALE of 9.4 years (as at 1 July 2017);

The analysis provided is general in nature and is based on Colliers International market knowledge and does

not reflect any special considerations or circumstances; and

The market information provided is current as at the time it is written.

In the event that any of the above assumptions are incorrect or have changed then it is requested that Colliers

International be notified in writing, as it could change the scope and services rendered to the client.

01 Introduction

The purpose of this report is to provide a detailed overview

of the Brisbane metropolitan office market as it relates to

Centuria’s purchase of 1231 Sandgate Road, Nundah.


KEY FINDINGS


Key Findings

Summary

Colliers International considers that the Property:

› is of an A Grade metropolitan office standard and is superior to anything that is currently available in the

Nundah, Brisbane Airport, Hamilton and Chermside locations.

› is well located and has good access to high frequency rail and bus public transport options;

› has good access to major road networks including Sandgate Road, Gateway Motorway and Airport Link Tunnel

and is within 15mins drive of the Brisbane CBD;

› has favourable locational characteristics and amenity including being next door to the Nundah Village

Shopping Centre and within 700m radius from the Mirvac owned Toombul shopping centre;

› has large flexible floor plates and good natural light and would likely appeal to a variety of tenant types who

have larger flexible floor space requirements.

A breakdown of the relevant findings (by category) are shown below.

Location

Nundah is well located approximately 8km north east of the Brisbane CBD.

Nundah is serviced by high frequency train and bus services.

Nundah is proximate to the Brisbane Airport, Airport Link Tunnel and Gateway Motorway and within 15mins drive

of the Brisbane CBD.

Nundah provides good amenity with supporting retail and food and beverage offerings in the Woolworths

anchored Nundah Village shopping centre as well as being proximate to Toombul shopping centre which was

recently acquired by Mirvac. There are also a number of educational facilities (primary and secondary schools)

within a 700m radius of the building.

Socio-Demographic

According to Queensland Treasury, the estimated resident population of Nundah (SA2) was 11,816 persons as

at 30 June 2015 and has showed an average annual growth rate 2.2% over the 5 years to 2015 and 3.5% over

10 years which is higher than the Brisbane average of 1.6% and 1.8% respectively over the same periods.

Asset

The Property is a high quality 5 Star Green Star designed (v3) ‘A’ Grade Metro Office Building, comprising 144

secure basement car parking, ground floor retail accommodation, mezzanine retail accommodation and six upper

levels of office accommodation. The building currently has a strong 4.5 Star NABERS Energy and 4.5 Star

NABERS Water rating.

02 Key Findings


The Property provides 10,224 square metres of A Grade office space accommodation. The large floor plates

range in sizes of up to 2,150 square metres and offer good natural light and flexibility for tenant requirements.

The high car parking ratio and end of trip facilities are also positives for the building.

The Property is close to passenger rail services at Nundah station and has a vibrant amenity offering in and

around the Nundah Village shopping centre for food and dining and other services.

Office Market

Nundah falls within the North Brisbane Metropolitan Office Market. Currently, the North Brisbane Metropolitan

Office Market is performing better than the overall Brisbane Fringe market, with an assessed vacancy rate of

8.81% versus 12.60%. This is likely to be due to the limited supply within the North Brisbane Office Market,

locational characteristics and access to public transport, roads and the airport.

New supply in the North Brisbane markets, particularly the Urban Renewal areas, has moderated in the last 3

years and there has been below trend levels of supply. Currently only 900 Ann Street, Fortitude Valley (which is

100% committed to Aurizon) and Lendlease’s K5 in the RNA Showgrounds are under construction.

Any new office development will be demand led and subject to high tenant pre-commitment levels and incentives,

particularly for the Brisbane Airport, Hamilton and Chermside Precincts. This is likely to keep new competing office

supply in the short-to-medium term constrained, and will underpin current rental levels and future growth, should

white collar growth improve as forecasted.

Competitive Analysis

In terms of competition, Colliers considers that the Property is of a superior A Grade office quality to anything that

is currently available in Nundah, Brisbane Airport, Hamilton and Chermside.

The most comparable product to the Nundah Property is the larger format, A Grade premises available in Fortitude

Valley/Newstead (Urban Renewal precinct), where gross face rentals of $520 - $600/m2 are achievable.

Leasing

Whilst the Property is fully tenanted, on a hypothetical leasing basis, the building design and configuration would

appeal and support tenants whom:

› have larger flexible floor space requirements (i.e multi-floor or whole floor occupiers);

› who do not require a CBD presence;

› have a north Brisbane locational requirement; and/or

› require proximity to major road, passenger rail services, airport and port infrastructure and access to the CBD.

On a hypothetical leasing basis, Colliers International considers that the Property may appeal to the following

tenant types:

› State or Federal Government- e.g ATO, Department of Education etc.

› Semi Government Tenants – e.g Energex, Ergon

› Large engineering and civil contractors – e.g Aecom, Golding, Clough

› Mining/ Energy Companies

› Travel or Airport Related Companies – e.g Virgin Australia, Flight Centre, Boeing

› Banking, Superannuation and Insurance groups – e.g Bank of Queensland, Sunsuper, Allianz

› Education and Training Providers

› IT and Telecommunication companies


LOCATIONAL ANALYSIS - NUNDAH


3.1 Locational Profile

Location

The Site is located centrally within Nundah which is approximately 8km radially north east of the Brisbane CBD.

Figure 1 – Location Map

03 Locational Analysis -

Nundah

Nundah is located approximately 8km

north east of the Brisbane CBD.

Brisbane Airport

Brisbane CBD

Nundah

Gateway Motorway


Figure 2 – Site in context of surrounding uses/activities

Toombul Shopping

Centre (Mirvac)

Toombul Train

Station

Nundah Train

Station

Nundah Village

Shopping Centre

Subject Site

Airport Link Tunnel Entrance/Exit (Road)

Nundah State

School (Primary)

St Joseph’s

Nundah (Primary)

Mary Mackillop

College (Secondary)

700m radius


Figure 3 – Nundah Suburb Boundary Map

Access and Movement

Nundah is connected by road and rail, which are the primary modes of transport. The bus network provides secondary

transport access to Nundah.

Road

Sandgate Road is the primary north/south connector which runs through the centre of Nundah and carries an average

annual daily traffic count of 40,600 cars (DTMR, 2014). There is an underground bypass (Nundah bypass) which

directs primary through traffic underneath the Nundah primary business area (which includes the area at which the

subject site is located).

The eastern boundary of Nundah is Southern Cross Way which is an off-shoot connector of the Gateway Motorway.

The southern boundary of Nundah is the entry/exit tunnel to the Airport Link Tunnel which connects through to Bowen

Hills and CBD and other major road tunnels (Clem 7 to the south and Legacy Way to the west).

Rail

Nundah contains two train stations Toombul station (opposite Toombul shopping centre) and Nundah station

(adjacent to the Property), which are six stops from Brisbane Central rail station.

Commercial Activity Centres

The two primary commercial centres within Nundah are the areas around the Nundah Village shopping centre and

the subject site and the Toombul shopping centre to the south.

Nundah Village is a Woolworth’s anchored neighbourhood centre that directly adjoins the Property.

Toombul shopping centre comprises 44,000sqm of retail and is located on a 10Ha development and was purchased

by Mirvac in 2016 for $228m. Toombul is anchored by Coles, Kmart, Target, Aldi and Bunnings.


3.2 Demographic Profile

Population and Growth

According to Queensland Treasury, the estimated resident population of Nundah (SA2) was 11,816 persons as at

30 June 2015 and has showed an average annual growth rate of 2.2% over the 5 years to 2015 and 3.5% over 10

years as compared to the Brisbane average of 1.6% and 1.8% respectively over the same periods.

According to Queensland Government Population Projections, the average annual population growth rate of Nundah

from 2011 through to 2036 is forecasted at 1.3%.

From a demographic perspective, 43% of the resident population is within the 25-44 year age cohort as compared

to 33% across the Brisbane LGA.

Household Income and Size

According to the ABS, the median total personal household income is approximately 10% higher in Nundah than the

Brisbane median, however the total family income is about 5% lower.

Employment

According to the ABS, the largest proportion of employed persons within Nundah was in the Health Care and Social

Assistance category at nearly 12%.

In terms of employment by occupation, the largest proportion of people employed were identified as professionals

at nearly 27% and clerical and administrative workers at 19.2% of the working population.

Locality 2011 2016 2021 2026 2031 2036 Average Annual Growth (2011-2036)

Projected Population

Nundah (SA2) 10,896 11,930 12,927 13,720 14,537 15,064 1.3%

Region Median Total Personal Income ($/month)

Median Total Family Income ($/month)

Median Mortgage Repayment ($/month)

Average Household Size (people)

Nundah $3,056 $7,092 $2,031 2.0

Brisbane $2,784 $7,492 $2,100 2.6

Top 5 Employment by Industry Classification Nundah SA2 (% of employed persons)

1. Health Care and Social Assistance 11.6%

2. Professional, Scientific and Technical Services 10%

3. Public Administration and Safety 9.2%

4. Transport, Postal and Warehousing 8.4%

5. Retail Trade 8.3%


Residential Sales and Median Dwelling Price

According to Core Logic, there were 410 sales transactions in Nundah in the 12 months to 31January 2017 with a

median dwelling price of $470,000.

Houses made up around 30% (120) of all sales and had a median sales price of $651,000 and units comprised 52%

(213) of all sales and had a median of $468,000 over the period. The balance of sales transactions related to

commercial, land or unspecified property types.

Building Approvals

According to the ABS, there were 405 residential dwelling approvals in the 12 months to 31 January 2017. Of these

building approvals, 384 (95%) were for dwellings other than detached houses (e.g apartments).

Figure 4 – Nundah Socio-Demographic Profile – Census 2011

Nundah SA2 Greater Brisbane Queensland

Population and Households

Total Persons 10,400 2,066,000 4,319,300

Average Annual Income

Per Household $89,600 $94,100 $86,800

Per Capita $43,900 $35,600 $33,700

Age Distribution (%)

0-14 12.1 20.1 20.3

15-24 14.6 14.5 13.6

25-44 40.6 29.6 27.9

45-64 21.6 24.1 25.2

65+ 11.1 11.7 13.1

Employment (%)

In Labour Force 75.2 68.5 66.9

Unemployed 4.9 5.9 6.0

White Collar Occupations 75.0 70.4 66.6

Employed per Household 1.2 1.3 1.2

Dwelling Structure (%)

Detached 31.8 79.1 78.6

Semi-detached 12.0 8.6 8.4

Flats/Units 56.1 11.7 11.8

Other 0.1 0.7 1.3

Dwelling Tenure (%)

Owner 18.0 27.9 29.7

Purchaser 26.8 37.6 35.4

Renter 54.7 33.7 34.0

Mobility (%)

No Car 15.3 8.0 7.4

1 Car 49.0 36.4 36.5

2+ Cars 35.7 55.6 56.1


Education (%)

Bachelors Degree 20.6 15.8 12.8

Grad Dip./Grad Cert. 2.5 1.9 1.6

Postgraduate Degree 5.3 4.2 3.0

Household Type (%)

Couples with Children 16.6 32.8 31.0

Couples without Children 24.0 27.0 28.6

Single Parent Household 8.8 11.8 11.6

Lone Person Household 38.3 21.8 22.8

Group/Other Household 12.3 6.7 5.9

Ethnicity (%)

Only English spoken at home 82.1 86.1 89.7


ASSET OVERVIEW


4.1 Site Details Based on our preliminary desktop searches, the Property comprises the following:

1231 Sandgate Road, Nundah Lot Description Lot 1 on SP245049

Land Area 5,597m2

NLA Office – 10,224m2

Retail – 2,757m2

Total 12,981m2

Road Frontages Sandgate Road – 42m (approx.)

Aspinall Street – 78m (approx.)

Carparks 144 car spaces

Major Tenants Energex – 8,755m2

Powerlink – 1,469m2

Go Health Clubs – 2,017m2

4.2 Building Characteristics The subject Property forms part of the Circa Nundah mixed use development and is bound by Sandgate Road and

Aspinall Street, within the suburb of Nundah, approximately 9.1 kilometres (by road) north of the Brisbane General

Post Office (GPO).

The Property is a 5 Star Green Star designed (v3) ‘A’ Grade Office Building, comprising secure basement car parking,

ground floor building entry, lift foyer and retail accommodation, mezzanine retail accommodation and six upper levels

of office accommodation. The Property currently has a 4.5 Star NABERS Energy and 4.5 Star NABERS Water rating.

The Property provides secure basement parking for approximately 144 cars, 2,757 square metres of ground floor

and mezzanine retail accommodation and 10,224 square metres of upper level A Grade office accommodation. The

floor plates of the upper level office accommodation range in size up to 2,150 square metres and have been designed

around a central service core and internal light atrium.

Ancillary improvements include storage facilities, end of trip amenities and bicycle storage within the basement,

additional public male and female ground floor toilet amenities and on site landscaping.

04 Asset Overview


4.3 Tenants The Property is underpinned by leases to Energex Limited (69.13%), Powerlink Queensland (11.60%) and Go Health

Clubs (15.93%) by area.

Tenancy Details

No. of Tenants: 12 Average Lease Duration 7.07 years

Major Tenants Weighted Lease Duration (Area) 9.48 years

Energex Limited 8,755.00 m² Weighted Lease Duration (Income) 9.34 years

Powerlink Queensland 1,469.00 m² Current Vacancy: 0.00%

Go Health Clubs 2,017.00 m²

Nundah Village Dental 204.00 m²

Edo Australia Pty Ltd (Sushi Edo) 113.00 m²

Remainder of Tenanted NLA 423.00 m²

Vacant NLA -

Total NLA 12,981.00 m²

4.4 SWOT Analysis

Strengths

High quality building with long-term Government leases.

Proximity to major road and passenger rail infrastructure.

Established surrounding retail amenity. Large format floor plates with good natural light and

suburban CBD views (on the upper levels). Access to Brisbane Airport and Port of Brisbane and

15 min drive from the Brisbane CBD via Airport Link Tunnel.

Approximately 9.1 km from the Brisbane General Post Office.

Weaknesses

Central atrium and open nature, will not appeal to all tenants, if the building was to be multi let in the future.

Lower ground floor retail less desirable to tenants.

Opportunities

Continued residential growth in and around Nundah. In terms of quality office accommodation, there is no

current competition and limited future competition in Nundah and Chermside.

Threats

Development of competing facilities in the medium to long term including office park/campus style developments.

Changes in structural configuration preferences to office workspace environments, i.e. reduction of floor space demand in the future.

Energex Limited; 69.13%

Powerlink Queensland;

11.60%

Go Health Clubs; 15.93%

Remainder of Tenanted NLA;

3.34%

Major Tenant Composition by Area


BRISBANE OFFICE MARKET OVERVIEW


Office Market Overview - Brisbane The overall Brisbane office market is the third largest office market in Australia, and comprises the Central Business District (CBD), adjacent fringe office precincts and major metropolitan centres, such as Chermside and Upper Mt Gravatt.

Figure 4– Relevant Brisbane Office Markets

05 Brisbane Office Market

Overview

An office market analysis has been

undertaken which considers the relevant

Brisbane office markets.


5.1 Brisbane CBD Office Markets

Key Indicators

Key Market Indicators – CBD Market (Property Council of Australia – Office Market Report)

Jul-16 Jan-17 % Change

Stock (m2) 2,261,878 2,280,055 0.8%

Vacancy (m2) 381,427 349,556 -8.36%

Vacancy (%) 16.9% 15.3% -

Annual Net Absorption (m2) 43,230 94,601 118.83%

New Supply (m2) 115,134 75,853 -34.12%

Market Overview

The Brisbane CBD office market is the largest and most established office market in Queensland. It comprises four

major office precincts, including: Financial Precinct (Golden Triangle), Government Precinct, Retail Precinct and

North Quarter, as well as the minor Midtown and Uptown transition areas.

The Brisbane CBD office market has increased by 30% over the 10 years to January 2017. The majority of stock can

be currently classified (according to the PCA), as either A Grade (40%) or B Grade (33%).

According to the Property Council of Australia (PCA) the Brisbane CBD office vacancy rate declined from 16.9% in

July 2016 to sit at 15.3% as at January 2017. This is the first downward movement in vacancy since July 2015.

Contributing to the decline, premium grade vacancy fell from 21.1% in July 2016 to sit at 12.2% as at January 2017.

Similarly, A grade office vacancy also declined from 13.9% to 11.9% over the same period. In contrast, vacancy for

secondary grade stock B and C grades both increased over the period with both siting at just under 20% as at January

2017.

0

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500,000

600,000

700,000

800,000

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PremiumGrade

A-Grade B-Grade C-Grade D-Grade

Brisbane CBD Stock Levels (sqm)


Looking forward, we anticipate prime vacancy to decrease gradually in the short term as tenants seek to upgrade

their office accommodation, driven by high incentives and low effective rents on offer. Our forecasts show that

vacancy is not likely to lift again until the middle of 2019 when 300 George Street is anticipated for completion

(assuming a 30% pre-commitment at time of completion).

Rental Forecast

A protracted period of soft fundamentals in the leasing market led to a steady continuance in high incentives for both

prime and secondary space during the first half of FY2017, albeit underpinning prevailing gross rental levels. We

expect forecast white collar growth to drive demand for office space over the next three years, reducing vacancy and

support conditions suitable for rental growth in the medium term.

5.2 Brisbane Fringe Office Markets

Key Indicators

Key Market Indicators – Brisbane Overall Fringe Market (Property Council of Australia Office Market Report)


Stock (m2) 1,195,287 1,209,374 1.2%

Vacancy (m2) 154,625 152,177 -1.58%

Vacancy (%) 12.9% 12.6% -

Annual Net Absorption (m2) -6,378 15,462 342.43%

New Supply (m2) 0 23,800 -


Market Overview

The Brisbane Fringe Office Market comprises five distinct precincts, Urban Renewal, Inner South, Milton, Spring Hill

and Toowong, and now provides a critical mass of office supply and amenity, which is a genuine alternative to the

CBD. Assets within the Brisbane Fringe are characterised for having large floor plates, more affordable market rents

than the CBD, high car parking ratios and green building credentials. Despite wavering economic conditions,

Brisbane’s Fringe office market has remained resilient with the overall vacancy rate, according to the Property Council

of Australia, falling over the last six months from 12.9% in July 2016 to sit at 12.6% as at January 2017. Additionally,

vacancy for A-Grade stock over this period fell from 11.6% to 11.2%.

The below graph shows vacancy for each Fringe precinct for July 2016 and January 2017. Both Inner South and

Spring Hill experienced an increase in vacancy with the remainder precincts all recording a decline. The Brisbane

Fringe office vacancy rate at 12.6% still sits below that of the Brisbane CBD office market at 15.3% as at January

2017 and is expected to improve with a low future supply pipeline and increasing white collar demand.

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Brisbane Fringe Stock Levels (sqm)


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Brisbane Fringe Office Vacancy by Grade (%) Jul-16 Vs Jan-17

Jul-16 Jan-17

Source: PCA OMR, Jan-17

0%

5%

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25%

Inner South Milton Spring Hill Toowong Urban Renewal

Brisbane Fringe Office Vacancy by Precinct (%)Jul-16 Vs Jan-17

Jul-16 Jan-17

Source: PCA OMR, Jan-17


5.3 North Brisbane Metropolitan Office Market The North Brisbane Metropolitan Office Market comprises the following areas:

Urban Renewal Areas (Fortitude Valley, Bowen Hills, Newstead),

Hamilton Northshore,

Brisbane Airport; and

Chermside.

Nundah is within the North Brisbane Metropolitan market.

1. Urban Renewal (Fortitude Valley, Newstead and Bowen Hills)

Urban Renewal – Key Market Indicators (Property Council of Australia – Office Market Report)


Stock (m2) 484,156 480,726 -0.71%

Vacancy (m2) 50,284 47,672 -5.2%

Vacancy (%) 10.4% 9.9% -

New Supply (m2) 0 0 0

The Urban Renewal precinct skirts the northern side of the Brisbane River to the east of the CBD comprising the

suburbs of New Farm, Teneriffe, Fortitude Valley, Bowen Hills and Newstead. The precinct is more geographically

dispersed than other large office markets such as Milton and Spring Hill and is located approximately 2-4km from

Brisbane’s CBD.

This precinct has grown substantially over the last decade with significant new A grade office developments along

with greater amenity and better car parking ratios enticing major corporates to relocate from Brisbane’s CBD and

other fringe precincts.

In terms of transport options, Fortitude Valley and Bowen Hills are both connected by train however it is noted that

much of the office accommodation in Bowen Hills and Newstead in particular is located a significant distance from

the train stations.

2. Chermside

Chermside – Key Market Indicators (Property Council of Australia – Office Market Report)


Stock (m2) 34,298 34,298 0%

Vacancy (m2) 3,111 2,928 -5.9%

Vacancy (%) 9.1% 8.5% -


Chermside is identified as a major suburban business centre located approximately 12 km’s from the CBD and

dominated by Westfield Chermside, one of the largest shopping centres in Australia. Office accommodation/stock

within this precinct is limited and primarily comprises the ATO complex and older style B Grade office developments.


3. Hamilton (Hamilton Northshore)

Hamilton – Key Market Indicators (Property Council of Australia – Office Market Report)


Stock (m2) 22,962 22,962 0%

Vacancy (m2) 3,204 2,019 -37%

Vacancy (%) 13.9% 8.8% -


Located 6 kilometres radially from the Brisbane CBD, Hamilton (comprising BTP Northshore) is a significant urban

waterfront redevelopment project which covers 304 hectares of former industrial and port land along the Brisbane River.

The majority of Hamilton Northshore is to be developed for residential and mixed use retail and leisure and

entertainment activities.

BTP Northshore Hamilton is an office park development within the Hamilton Northshore project and will provide

approximately 140,000 sqm of commercial office space, in close proximity to the Australia Trade Coast, Brisbane Airport

and CBD.

Hamilton Northshore whilst an emerging precinct currently lacks retail amenity and support services and has only limited

public transport options.

Office accommodation within this precinct is primarily made up of ‘design and construct’ developments with smaller

format floor plates and high levels of on-site car parking.

4. Brisbane Airport

Brisbane Airport – Key Market Indicators (Property Council of Australia – Office Market Report)


Stock (m2) 78,284 78,284 0%

Vacancy (m2) 1,702 1,702 0%

Vacancy (%) 2.2% 2.2% -

New Supply (m2) 0 0 0%

Brisbane Airport is 9 km’s radially from the Brisbane CBD and is the third busiest airport by aircraft movements in

Australia. From 2014-2020 the airport is undergoing the biggest aviation project in Australia, with the development

of a 3.3km long and 60m wide runway located west of and parallel to the existing runway. With additional taxiways,

navigational aids, airfield infrastructure and hundreds of hectares of airfield landscaping, this will give Brisbane the

best runway system in the country.

Brisbane Airport Corporation (‘BAC’) operates, manages and develops the Brisbane Airport under the terms of a 50

+ 49 year lease acquired from the Commonwealth Government when it privatised Brisbane Airport in July 1997. BAC

presently holds investment property assets with a market value in excess of $1 billion. Brisbane Airport occupies a

surveyed area of 2,687 hectares within the Australia Trade Coast Precinct.

Office accommodation within this precinct is primarily made up of modern ‘design and construct’ developments which

largely appeal to aviation, freight and logistics and government tenants. The majority of buildings comprise office and

warehouse style space. Development within the confines of Brisbane Airport is guided by the Brisbane Airport Master

Plan 2014.


5. North Brisbane Metropolitan Office Market - Summary

Brisbane Northern Metropolitan Office Indicators (Property Council of Australia – Office Market Report)

TOTAL STOCK (sqm)

Brisbane Fringe Urban Renewal Brisbane Airport Hamilton Chermside

TOTAL Northern

Metro.

Jan-16 1,195,287 484,156 78,284 16,943 34,298 613,681

Jul-16 1,195,287 484,156 78,284 22,962 34,298 619,700

Jan-17 1,209,374 480,726 78,284 22,962 34,298 616,270

Vacancy

North Brisbane Metropolitan Office Indicators (Property Council of Australia – Office Market Report)

TOTAL VACANCY (%)

Brisbane Fringe Urban Renewal Brisbane Airport Hamilton Chermside

TOTAL Northern

Metro.

Jan-16 12.80% 11.20% 2.50% 19.1% 8.50% 10.32%

Jul-16 12.90% 10.40% 2.20% 13.9% 8.50% 9.38%

Jan-17 12.60% 9.90% 2.20% 8.8% 8.50% 8.81%

We note that the North Brisbane Metropolitan Office Market comprises approximately half of the Brisbane Fringe

office market and is currently performing better overall, with an assessed vacancy rate of 8.81% versus 12.60%.

Rental Forecast

Rents in the North Brisbane Metropolitan Office market have stabilised in recent years, albeit with the underpinning

support of market driven incentives, after strong growth through the 2006-08 period. The loss of development ready

land to alternate residential uses, plus high land and incentive costs, have limited office development in the last three

years. Similar to the CBD, we expect forecast white collar growth to drive demand for office space over the next three

years, reducing vacancy and support conditions suitable for rental growth in the medium term.

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g-1

7

Mar-

18

Oct-

18

May-1

9

North Brisbane Metropolitan OfficeGross Face Rents ($/sqm)

Brisbane Fringe Urban Renewal Hamilton Chermside Airport

Forcast


Future Supply

Brisbane Fringe / Urban Renewal

No new supply additions are anticipated to come online in the Metro markets in 2017. Thereafter there are only two

projects anticipated in 2018 - 900 Ann Street Fortitude Valley a 21,625 sqm office building which is 100% pre-committed

to Aurizon, and K5, located at 50 King Street Bowen Hills, a 14,000 sqm office building which is set to become Australia’s

tallest Cross Laminated Timber (CLT) constructed office building, of which 50 per cent is pre-committed to

Aurecon. Whilst a number of other projects are currently in the pipeline, they are currently mooted at this stage and are

unlikely to proceed unless a significant level of tenant pre-commitment is achieved.

Brisbane Airport

Brisbane Airport’s latest commercial development, Five Lobelia Circle which includes commitment by the Australian

Federal Police is now complete. Currently remaining within the building is 425sqm of office located on the top floor.

The Skygate Home and Life Centre is taking shape, with a number of large format retailers expressing interest in

tenancies. The proposed development will be located adjacent to the existing DFO site.

The purpose-built office and laboratory for Hanson Construction Materials will be complete early this year. The building

is the first within the Boulevard Business Park with three remaining campus-style office sites remaining for development.

Hamilton

Puma’ Energy’s $30 million Australian headquarters was recently completed within the project and comprises a four

level A Grade 6,000sqm office building.

Looking forward, the latest addition to the precinct, 375 Macarthur Avenue, is set to open its doors in mid-2017. Also

detailed design works are underway on 381 Macarthur Avenue, a three level, 3,000sqm building with onsite café.

Any future supply is likely to be made up of ‘design and construct’ developments for specific tenants.

Chermside

There is currently only one project planned within Chermside the Wheeler Gardens St Marks Development. The current

proposal to be located at 930-950 Gympie Road, Chermside is a 23,685 sqm office/medical development.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

900 Ann St K5 RNA K2/K3 11 BreakfastCreek Rd

301 Wickham CDOP 7 Green Square 3 52 Alfred St

Brisbane Fringe New Office Pipeline

Precomm Remaining Mooted Sublease


Conclusion

New Supply in the North Brisbane Metropolitan markets has moderated in the last 3 years, and has been below trend

levels of supply. Currently only 900 Ann Street, Fortitude Valley (which is 100% committed to Aurizon) and Lend

Lease’s K5 in the RNA Showgrounds (50% committed) are under construction.

Any new development will be demand led and subject to high tenant pre-commitment levels and incentives,

particularly for the Brisbane Airport, Hamilton & Chermside Precincts, and therefore likely to be constrained.

5.4 Competitive Analysis

Competition

In the current office market climate, competition for A-grade and higher quality B-grade metropolitan office space

would be likely to come from the following areas:

Primary Competition

Urban Renewal areas, particularly Newstead, Bowen Hills and Fortitude Valley.

Inner South, including South Brisbane and South Bank.

Hamilton Northshore – large land availability and design and construct options.

Recent North Brisbane Metropolitan Office Leasing Transactions

In assessing a comparable case study for the office component of the subject Property, we have considered a variety

of available rental evidence, a selection of which is detailed as follows:

Property / Tenancy Grade

North Brisbane

Metro Office

Precinct

Lessee Lease

Date

Term

(years)

NLA

(m²)

Rent $/m²

(Gross

Face)

Reviews Incentive

(Gross) Comparison

900 Ann Street,

Fortitude Valley A Urban Renewal

Aurizon Operations

Limited

Circa

Apr- 18

12+5+5

years 18,991 $625/m²

Fixed

3.25% Confidential Superior

Montpelier Road,

Albion A Urban Renewal

St Vincent’s

Healthcare Dec-16 5 years 902 $520/m²

Fixed

3.50% Circa 32% Comparable

77 Hudson Road,

Albion B Urban Renewal Vita Group Nov-16 7 years 2,998 $490/m²

Fixed

3.50% Circa 40% Inferior

100 Wickham Street,

Fortitude Valley B Urban Renewal State of QLD Sept-16 7 years 4,980 $520/m²

Fixed


515 St Pauls Terrace,

Fortitude Valley A Urban Renewal Careers Australia Mar-16 2 years 1,969 $560/m²

Fixed

3.00% Undisclosed Comparable

100 Wickham Street,

Fortitude Valley B Urban Renewal BJB Global Pty Ltd Aug-15 3 years 996 $512/m²

Fixed


HQ North, 520

Wickham Street,

Fortitude Valley

A Urban Renewal Cunningham

Lindsey Jul-15 6 years 1,118 $575/m²

Fixed

3.75% Circa 32% Comparable

5 Lobelia Circle,

Brisbane Airport B Brisbane Airport

Royal Flying

Doctor Service Dec-16 5 years 901 $425/m²

Fixed


10 The Boulevard,

Brisbane Airport B Brisbane Airport Hanson Sep-16 12 years 3,054 $400/m²

Fixed



Property / Tenancy Grade

North Brisbane

Metro Office

Precinct

Lessee Lease

Date

Term

(years)

NLA

(m²)

Rent

$/m²

(Gross

Face)

Reviews Incentive

(Gross) Comparison

42-44 Qantas Drive,

Brisbane Airport B Brisbane Airport

Dept. Agriculture &

Water Resources Feb-16 5 years 4,115 $400/m²

Fixed

3.50%

Capital works to

building Inferior

Da Vinci Business

Park, Brisbane Airport B Brisbane Airport Officeworks Jan-16 5 years 309 $320/m²

Fixed

3.5% $110,000 Inferior

371 Macarthur

Avenue, Hamilton B Hamilton Commscope Oct-16 3 years 185 $415/m²

Fixed

3.0%

3 months

rent free +

$60k fitout

Inferior

405 Macarthur

Avenue, Northshore

Hamilton

B Hamilton Australian

Childcare Jan-16 16 years 1,000 $415/m²

Fixed

4.0%

$500,000

capital

contribution

Inferior

371 Macarthur

Avenue, Hamilton B Hamilton Wabtec May-15 7 years 184 $401/m²

Fixed

3.5%

Turnkey

fit out Inferior

371 Macarthur

Avenue, Hamilton B Hamilton Fujitsu May-15 7 years 400 $403/m²

Fixed

4.0%

Turnkey

fit out Inferior

365 Macarthur

Avenue, Hamilton B Hamilton Puma Energy Jun-15 15 years 6,019 $393/m²

Annual

CPI Nil Inferior

371 Macarthur

Avenue, Hamilton B Hamilton

Sandhills

Publishing Jan-15 5 years 828 $398/m²

Fixed


Hamilton Road,

Chermside A Chermside

Brisbane City

Council Jan-17 15 years 6,000 $475/m²

Fixed

3.50% Fitout Inferior

831 Gympie Road,

Chermside B Chermside

Department of

Health Aug-16 6 Years 2,886 $393/m²

Annual

CPI Circa 35% Inferior

831 Gympie Road,


Payroll Portfolio

Health Support

QLD

Aug-16 6 years 703 $400/m² Annual

CPI Circa 35% Inferior

831 Gympie Road,


Department of

Housing & Public

Works

Jun-15 3 years 372 $417/m² Fixed

4.00% Undisclosed Inferior

Conclusion

In terms of competition analysis, we believe that given the A Grade quality and nature of the accommodation provided

by the subject Property, it is of a superior standard to anything currently available in Nundah, Brisbane Airport,

Hamilton and Chermside.

It is most comparable to the larger format, A Grade premises available in Fortitude Valley/Newstead (Urban Renewal

precinct), where gross face rentals of $520 - $600/m2 are achievable.


5.5 Indicative Leasing Strategy (Hypothetical Scenario) It is noted that the Property is fully tenanted and has a weighted lease duration (area) of 9.4 years (as at 1 July 2017).

Centuria has requested that Colliers provide a hypothetical leasing strategy in order to understand the types of

tenants who might have an interest in an office building of this grade and in this location.

Given the remaining terms on the major head leases are well beyond forecasting periods, we are not able to foresee

the types of tenants or the competitive profile as at the time that the building may become vacant and as such, our

analysis is based on tenants, space requirements and competitor offerings in the current market.

Site and Building

The Property is of an A-grade metropolitan office standard and has a 4.5 Star NABERS Energy and 4.5 Star NABERS

Water rating.

The building is close to passenger rail services at Nundah station and has a vibrant amenity offering in and around

the Nundah centre for food and dining and other services. The location is proximate to the Brisbane Airport, Airport

Link Tunnel and Gateway Motorway. The building is within 15mins of the Brisbane CBD.

The building provides a high car parking ratio.

Target Tenants

The building design and configuration is supportive of tenancies with larger space requirements who do not require

a CBD presence and/or those tenants who require a north Brisbane location with proximity to major road, rail, airport

and port infrastructure.

Colliers International considers that the Property would be suitable to the following tenant types:

State or Federal Government- e.g ATO, Department of Education etc.

Semi Government Tenants – e.g Energex, Ergon

Large engineering and civil contractors – e.g Aecom, Golding, Clough

Mining/ Energy Companies

Travel or Airport Related Companies – e.g Virgin Australia, Flight Centre, Boeing

Banking, Superannuation and Insurance groups – e.g Bank of Queensland, Sunsuper, Allianz

Education and Training Providers

IT and Telecommunication companies

Note: The examples provided are for information purposes only and are based on Collier’s market knowledge and/or are existing tenants in other

locations who have significant office space requirements outside of the Brisbane CBD.

In the event that a whole of building occupier could not be procured, then the suggested tenancy targets would be

for:

Larger anchor tenants for the Energex space (8,700sqm) which includes the central atrium/stairwell area.

Various private commercial tenants with a preference for larger full floor and flexible tenancies (circa 1000

sqm).

Potential for shared office (co-working style tenants) who may have larger space requirements.


Colliers International Brisbane

Level 30, ONE ONE ONE

111 Eagle Street

Brisbane QLD 4000

+61 7 3229 1233

www.colliers.com.au

http://www.colliers.com.au/

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