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The G20 a game changer for Brisbane?

July 24, 2012 / By

Brisbane has been selected as the venue for the G20 summit to be held in November 2014. The announcement created controversy in Australia, with some feathers ruffled that Sydney and Melbourne were overlooked. The decision underlines a steady re-weighting of economic clout and population that is driving the resource-based states of Queensland and Western Australia into positions of greater profile globally.

The G20 summit will not be Brisbane’s first event of global significance. World Expo ’88 is credited with cementing Brisbane’s transition from a big country town into a major capital city that could align itself with Sydney and Melbourne. This event left Brisbane with Southbank; a world class park, recreation, dining, cultural and convention precinct. Southbank will again be centre stage at the G20 Summit in 2014 and hopefully will again leave a lasting impression on the 4,000 delegates and 3,000 media from 27 countries who will be visiting the city in 2014.

Offshore real estate investors moving funds into Australia show a strong preference for Sydney and Melbourne. Domestic institutional investors are also typically overweight these two markets. But these portfolio decisions are getting harder to justify. Historically the best Brisbane CBD assets have traded at around a 75 bp yield discount to Sydney and Melbourne – the question for investors is whether this spread will narrow going forward as Brisbane’s profile rises ?

The Brisbane CBD office market accounts for 13% of total Australian CBD office market stock by area, and around 14% by value. The city of Brisbane has had its ups and downs in recent years. Between June 2008 and December 2009, office prime gross effective rents declined 46% under the impact of the Global Financial Crisis and vacancy rose from 1.4% to 10.2%. In January 2011 the Brisbane CBD was closed for five days due to major flooding. However, Brisbane’s recovery from these adversities has been swift. In the office market, capital values have been rising since December 2010 and the vacancy rate, currently 8.8%, is forecast to decline to 5.6% in 2014. In June, Brisbane’s latest premium grade office tower, the 64,000 sqm 111 Eagle Street, reached practical completion around 85% leased. The newly elected State government of Queensland is currently reviewing plans for a series of major developments in the CBD over the next three years.

The G20 decision is a reminder to Sydney and Melbourne that the long term trends are running Queensland’s way. Over the last 25 years, Queensland’s share of Australia’s GDP has risen from 14.8% to 19.4%. Strong economic growth has brought with it strong population growth. Queensland economic growth has averaged 4.5% per annum over this period, compared to 2.8% growth in New South Wales and 3.2% in Victoria. Queensland’s share of the national population has also risen to over 20%.

Perhaps Queenslanders will be able to look back and say the G20 summit established Brisbane’s international profile just as World Expo ’88 assured Brisbane an equal place on the national stage?

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