With the Olympics heading to Brisbane in 2032, and domestic migration hitting new highs, we take a look at what’s driving investor interest in the Sunshine State.
Queensland is now Australia’s top destination for domestic migration as people escape the southern states in droves. As the state that’s been least touched by Covid lockdowns on Australia’s east coast, and with several massive infrastructure projects underway, it’s no wonder pub property investors are looking in a northerly direction.
Brisbane’s Lord Mayor Adrian Schrinner shares the optimism, describing the Olympic Games announcement as a “huge vote of confidence in the future of Brisbane and will be remembered in years to come as a pivotal moment in the city’s history”.
The South East Queensland (SEQ) region spans the state’s major population centres of Brisbane, Ipswich, the Gold Coast, and the Sunshine Coast, and hosting the Games in 2032 is expected to be a boon for the economies and property markets of the region and the state in general.
Individuals are not the only ones on the march up north – interstate hotel groups and funds from Sydney and Melbourne are also migrating northwards, buying venues north of the border, with many more looking, according to pub property brokers.
Better yields
The SEQ pub market is a little different than the other states in a few ways, according to Paul Fraser, the Queensland director of the CBRE Hotels Investment and Brokerage team.
For starters, he says, you can’t sell liquor there unless you have a full commercial licence, which has historically seen the retail giants Coles and Woolworths (operated by AVC and Endeavour respectively) owning a higher proportion of pubs in Queensland than in other states, and this has tightened the supply of venues on the market.
“Obviously there’s also a bit of buzz with the Olympics,” Fraser says. “There are $65 billion in infrastructure projects happening right now, with 10 per cent of Brisbane’s CBD currently under construction.
“We have all these once-in-a-generation projects all happening now with an end goal of 2032. We’re looking at significant milestones for Brisbane, and that gives a lot of confidence to the city.”
Size matters
Vice president of JLL’s Hotel & Hospitality Group Tom Gleeson says that while Sydney is still the most liquid market, and therefore more accessible, he agrees that groups are now looking at South East Queensland for better yields.
Also, a significant amount of assets above $10m are being bought by southern investors, he says, with size a priority for new entrants.
“There’s a race to scale – groups are looking for assets that can do large numbers, whether that’s in gaming or food and beverage. They want large-scale venues that move the dial.
“A lot of Queensland pubs are quite big, so even with Covid restrictions, they still can get a fair few bodies into a venue because the square meterage is quite large.”
Pricing squeeze
Ric Kebblewhite, director of Bradfield Advisors, a Sydney firm that co-invests with publicans on assets, says he is increasingly being asked by prospective partners to inspect properties in the Sunshine State.
“Some of the people we are working with are after large format sites. These operators are seeking a large venue where they can deliver something unique to the market and create a real point of difference.”
He also points to the current access to cheap money as a contributor to the migration of capital northwards, which he says is driving up prices and creating competitive tension for assets in traditional markets like Sydney, Melbourne and now Brisbane.
“That is allowing the big guys to bid up prices, often at the expense of the smaller guys,” he says. “In Brisbane, we see the same scenario where the prices are getting pretty steep for up-and-comers.
Want to keep reading? Read the rest of the article below in the September issue of Australian Hotelier.