On 5 March 2015 Robert Dunne spoke at the Urban Development Institute of Australia (Queensland) on the past, present and future of Brisbane. 

Urban renewal is a well-recognised mechanism for enhancing Brisbane's local communities. Renewal design strengthens the unique features and special qualities of targeted areas to benefit surrounding neighbourhoods. But how is this best delivered, and are the areas identified for regeneration, the best ones? On 5 March 2015, Robert Dunne identified current and future development opportunities and how regeneration challenges are overcome with creativity and innovation.

Robert Dunne
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Where infrastructure goes, population flows and capital growth follows

Urban renewal will continue to play a leading role in shaping modern Brisbane’s standing as Australia’s ‘New World City’. For all those involved in the Brisbane development industry, the challenge is being closely engaged with this ongoing renewal. First, we shape our environment and then our environment shapes us. So be actively involved in creating your environment because thereafter your environment will be passively influencing you.

In Brisbane, there is a compelling case for investors and developers to stick to the popular locations and buy in the path of progress. The smart money is already invested in the locations seen to have the strongest growth prospects, and the future property buyers and tenants will be in these neighbouring streets and suburbs.

Keep a close eye on infrastructure as it is the key indicator in identifying new urban renewal investment and development opportunities. Existing and emerging infrastructure, particularly transport and community amenities, leads to population growth and then capital growth follows.

There is little doubt that Brisbane is heading up a new peak of development activity – there will be more concrete poured across the city in the next year than in the past year. The Brisbane CBD is naturally constrained by the river on two sides and the topography of Spring Hill to the west, but the development industry is responding with record height in its new wave of projects.

Hotel accommodation is also a major focus. Brisbane experienced a decade of no new hotels and now there are six underway, with further planned. Infill development opportunities of every scale abound right across the city, in particular on the northern and southern fringes.

Other key trends shaping Brisbane’s development include:

  • an influx of Asian capital
  • people choosing apartments over houses
  • a preference for inner suburbs over outer suburbs
  • the continued growth and influence of migrant buyers
  • student accommodation
  • retirement and aged care living, and
  • residential as a stand-alone investment class.

The avalanche of Asian capital being invested in Brisbane development sites, particularly from China, Hong Kong, Taiwan, Malaysia and Singapore, is a driving force in the market.

The focus is strongly on the development of new residential accommodation. However, there is also interest in student accommodation uses which has been further boosted by the incentive of the Brisbane City Council’s recent reduction in infrastructure charges.

There is also a rising trend towards residential being viewed as a stand-alone investment play for large-scale private and public capital. Whereas, traditionally, significant investment in residential was through ownership in niche property sectors such as student accommodation, retirement and aged care living, and hotels.

The combination of a low interest rate environment and the increasing acceptance of larger residential properties by investors, financiers and valuers is likely to see this trend continuing.

Robert Dunne 
Divisional Director
Savills Commercial Sales – QLD

Full Transcript

URBAN RENEWAL IN ACTION

If you go back just a few decades in Brisbane, if anyone was looking to shop at a big department store, they were heading down to Brunswick Street to McWhirters and TC Beirne, the interest in that area had started to wane when in 1992 the decision was made to close Queen Street and create a mall, and that became a retail focus just in time for the Commonwealth Games. All three levels of government realised that Valley area was underdeveloped, and they involved Trevor Redcliffe to revitalise the area. 
When Trevor became involved he didn’t seek to pour a lot of public funding into the area. He removed some of the restrictions that were already in place around usage, height and density and private investment poured in to the region.

The people of Brisbane were just starting to embrace the riverfront as an attractive place to live and work and there was an established residential component in New Farm. The area took about 10 year to gain traction with the public and in the past 10 years it has really blossomed. And if you look at how that area has progressed you can see that, the focal point of that region has marched north. Initially the focal point was around Brunswick Street, then it tracked north when Kevin Miller completed the Coca Cola redevelopment and Maloufs’ James Street markets in James Street. The focal point moved further north to Tony John’s Emporium once it was completed, and now the Gasworks is finished at Newstead Riverpark, it has become the focus of the area.

CURRENT TRENDS

There are 4 current trends I’d like to share with you that we are seeing in the market now.

Apartments over Houses

One of those is apartments over houses. For the first time in Brisbane, there’s been more apartments approved than houses. And when more apartments are approved, it’s not long before more apartments are built than houses and not long before more apartments are sold than houses here in Brisbane. And that’s the trend that’s not likely to change, if you go back to the 1970’s and 80’s, it was the opposite trend. There were people moving from in a city locations out for a tree change, bigger blocks, new homes in locations like Pullenvale, Brookfield, The Gap, and Bridgeman Downs. Now a few generations later, peoples’ values have changed and their buying habits have changed with them.

Inner over Outer

Inner city locations are favoured over outer locations. In the inner city there is certainly a lot more demand, a lot more construction, and that’s likely to continue. The question that comes to mind is, well, Who’s going to occupy all these apartments? Where are all the tenants going to come from? When someone is given the option live closer to where they work, move closer to the action, in something that’s newer, that’s similar cost or more affordable, they are generally going to take it. That’s going to have a ripple effect right across Brisbane. The inevitable outcome is you’re going to have some older housing areas in the outer suburbs that’s really going to struggle to identify tenants and buyers. And so, I think that that trend is already starting to happen. This trend results in a changing of the demographic of the buyers. The demographic of the buyers of houses in outer locations was often second or third home buyers, this is likely to shift to newlyweds and newer families. They often want the new kitchen and bathroom together with new marriage and new kids. When people can’t afford it where they are, they have to move further out. This shift is already happening.

Out of Town Buyers

The next thing you’ll start to see is rate of sale will dip in those outer regions, and eventually it’s going to affect the rent and the prices the people can sell for. And typically, if someone can’t sell their property for what they want they usually don’t sell it, it just means they hold on it for longer. So I think what you are going to see, the effect of these apartments being built in the inner city, is a stagnation of the renting and sale of all the homes in the other suburbs. And that’s one trend I think already started to happen, it’s certainly going to continue.

Some of that excess capacity that the locals were no longer buying is being made up by migrants. I think that’s the third trend that’s been happening at the moment, both in the city and in the other suburbs, there’s a lot more out of towners investing in property.

Residential as an Investment

People owning property as a principal place of residence accounts for almost about three quarters of Australians. Less than 5% of Australians own 3 properties or more. I think that is a trend that is likely to change. It’s less likely to occur at an individual level and more at an institutional level. Public and private equity is going to flow into residential. In the past, institutions invested in residential in very specialised areas, such as hotels, caravan parks, retirement villages and student accommodations. Institutions will start to embrace owning larger scale main stream residential property as an investment.

STICK TO THE POPULAR LOCATIONS

The two pieces of advice I have for people looking for urban renewal opportunities, the first is stick to the popular locations, so if you’re looking for future buyers or tenants there are more than likely going to be in the neighbouring street and suburbs, the smart money is investing in areas that are most likely to get the strongest capital growth and that is where the demand already exists. It is not pioneering in outer other locations.

BUY IN THE PATH OF PROGRESS

The other piece of advice I have is that to buy in the path of progress. The path in progress can be predictable. There is a couple of early precursors, the first is infrastructure. When you look at the development of Australia, particularly on the eastern sea board all the major cities are located on or at the mouth of a river and that is because the early transport infrastructure was all the water ways and shipping channels. Ships come in from overseas, logging, livestock and products coming down rivers to the mouth and that is why the major cities in the eastern sea board are all on or near rivers. And once infrastructure is established and as this is attracting more people in, so as you add roads, rail, water, sewage and your local switches and parks, education, retail, then there is a self-fulfilling prophecy resulting in people staying in an established area. Where infrastructure goes, population flows and capital growth follows.