Ray White Commercial report examines Brisbane medical space market

Demand for professional health space is rising as Brisbane’s population grows and ages, according to Ray White Commercial data.

A new report, Between the Lines — Greater Brisbane Professional Medical Space Overview, has found competition for property among owner-occupiers and investors is pushing down yields and boosting capital values.

Ray White Commercial head of research Vanessa Rader says investment activity around professional health space in Greater Brisbane has been high over the past two years.

In 2017, $147.53 million changed hands and in 2016, when interest in the asset class first surged, the total was $116.56 million. In both 2014 and 2015, investment levels were around $50 million.

“In 2018 through to March, turnover has been limited with just $13.77 million changing hands as the volume of stock to market has slowed,” Ms Rader says.

“It is expected while we may not reach the highs of 2017, volumes will exceed the rates achieved in 2014-2015.”

Ray White Commercial TradeCoast director Jonathon Jones says a high volume of purchasers are owner-occupier medical professionals who consider the population and demographics of an area as key drivers.

“Typically, a high volume of young or elderly people within a catchment are highly attractive given the need for both general and highly specialised medical care,” Mr Jones says.

“However, given our more health and image-conscious society, there has been a growing interest in locations which have a high population in the 25-44 age range, particularly within sports and cosmetic medicine and most notably in inner-city locations.

“Health care professionals often will pay a premium for stock well located and highly aligned to the demographic needs of their patients.”

The price point, quality and stability of tenant has also lured investors to the asset class. Competition with the owner-occupier market has seen yields fall and capital values increase.

In 2018, the average yield is 5.97 per cent compared with 6.43 per cent in 2017 and 6.71 per cent in 2016. Average yields in 2014 and 2015 were around 7.50 per cent.

“Average capital values achieved across the recorded sales have shown some upward momentum and are now at $5305 per square metre, yet within a broad range which can extend up to $10,500 per square metre depending on the size, quality and location of the asset,” Mr Jones says.

The report also found there were 75 professional medical space projects — broadly categorised as medical suites, medical centres and hospitals — now in the development pipeline across Greater Brisbane.