6 February 2006
The Brisbane CBD apartment market has endured the worst of the current downturn and demand may potentially outstrip supply by 2007/08, according to Myles Campbell, Research Director of Resolution Research and Marketing.
His comments come as Citimark Properties confirmed the start of construction of its $120 million, 37 level Evolution residential tower on the corner of Tank Street and North Quay.
Citimark's Development Director, Mr Peter Morrow said that Hutchinson Builders had been appointed to construct Evolution and had commenced demolition works on the site last week.
"Evolution will be the only riverfront residential project to commence construction this year and one of only two to get underway in the CBD.
"Our confidence in proceeding is built upon very strong pre-sales with 47% of apartments now under contract.
"We also see a growing undersupply of residential stock in the CBD due to rising construction costs and the scarcity of sites.
"Projects with water views are the only developments that appear to be going ahead as evidenced by sales rates and growth achieved on waterfront property throughout south east Queensland.
"It is certainly difficult to justify the prices required to meet rising construction and land costs with non waterfront property. Any product that does not have water views faces difficulties.
"The lifestyle trend to inner city/CBD living is continuing - evidenced by record low vacancy rates in the CBD.
"This lifestyle trend together with migration, rising construction costs and low land availability has meant the development community cannot meet demand for CBD property," he said.
Mr Campbell said that the commencement of construction of Evolution was a tremendous result for both the project and the inner city market.
"The market's positive response to the project has put paid to the suggestion that in the face of construction cost increases, a more cautious consumer mood, and the abandonment of some development proposals, inner city living was a limited short term market.
"The progress of Evolution is demonstration of the on-going demand for well designed, finished, located and priced stock in the CBD market.
"Looking ahead, we believe that the Brisbane market has seen the worst of the downturn, and the combination of a robust economy, continuing high levels of employment growth and an extremely tight rental market will continue to see demand generated.
"Throughout 2005 Brisbane saw new releases in the CBD fall to less than half the long term average.
"Supply of quality product within the CBD is running out. Based on current stock levels, the supply / demand ratio in the Brisbane CBD is reaching a state of imbalance with demand potentially outstripping supply in the 2007/08 financial year.
"Demand for CBD properties will continue to be fuelled by strong interstate migration — (Queensland has the highest rate of interstate migration in Australia) — and a rapidly expanding rental market driven by lifestyle and affordability. This is unlikely to abate in the medium term.
"Total capital growth for CBD waterfront apartments has totaled 54% across the past eleven years from 1994 — 2005.
"Our research reveals that at the end of November 2005, there were no new projects mooted to enter the CBD market in 2006.
"Brisbane CBD apartments have remained the most stable of investments with yearly returns fluctuating no more than 1.5% making it the most secure and non volatile investment type across the major Australian investment Vehicles.
"Since 2001, CBD waterfront property has demonstrated a total capital appreciation in average values of 37% which equates to an annual capital gain of 7.4%.
Hutchinson Builders' Managing Director Greg Quinn said that the firm was delighted with its addition to the Evolution project.
"Evolution is a prestige appointment in every way and we're determined to deliver a project of distinction and quality.
"This riverside precinct of the CBD is undergoing a massive transformation and the success of Evolution sales to date shows that its location is highly sought-after," he said.
Hutchinson Builders has also been appointed as the builder to refurbish Citimark's adjoining commercial building — 179 North Quay.
Over $1 billion is being invested publicly and privately around Evolution in infrastructure including the State Government's North Bank proposals; the Tank Street Footbridge to Southbank; the Queens Street Mall extension; the Queensland Place improvement to the Roma Street precinct; and the exciting plans forming part of the Brisbane City Council's new CBD Masterplan.
The company currently has 21 projects under development including a $35 million luxury beachside resort — East on Byron in Byron Bay; and a new $35 million, 25ha industrial and business park on the former Mitsubishi engine plant site in Lonsdale in Adelaide's southern suburbs.
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