Chapter 1



Welcome to the Q2 2023 edition of Banner Asset Management’s Quarterly Property Report. A combination of cyclical and structural factors drove the performance of the local real estate market in the three months to June 30 as it adjusted to economic conditions and the lingering consequences of the pandemic.


Residential property continued to rebound in the face of rising interest rates, primarily as a result of continued supply issues and resurgent migration. The pace of the gains, however, began to slow in June – perhaps as a sign that rate hikes had quelled buyer confidence.

In commercial real estate, Australia’s industrial and logistics property remains a standout with the lowest national vacancy rate in the world. The outlook for the sector remains generally favourable as vacancy rates are expected to remain low for the foreseeable future. The local office market is facing similar headwinds to other countries but prime space continues to provide relatively solid results. The Brisbane CBD market, in particular, remains a standout performer in terms of rental growth.

In our Spotlight section, we take a look at the future of petrol stations as a result of the uptick in local electric vehicle (EV) sales. The available evidence suggests the full transition to EVs will likely take 30 years or so – and that petrol stations consequently continue to be a viable property investment. Petrol station owners are also diversifying their operations beyond fuel to include services such as food and convenience shopping, in a move which will complement their potential adoption of EV recharging facilities.

We hope you find these insights useful.

Chapter 2

Economic Update


Australia’s economic growth continues to moderate with the latest official figures showing gross domestic product (GDP) grew by 0.2% in the three months through March, and 2.3% compared to the same time last year 1.

It was the sixth straight quarter of economic growth but also the weakest quarterly growth since the COVID-19 Delta lockdowns in the September quarter of 2021, according to the Australian Bureau of Statistics (ABS).

Domestic demand was the primary contributor to GDP growth, while net trade detracted from growth (as imports rose more relative to exports).

The Reserve Bank of Australia (RBA) paused interest rate hikes at its April meeting but immediately recommenced raising rates in its two subsequent monthly meetings, pushing the official cash rate to 4.1%.

The central bank then paused rate hikes again in the first week of July, with RBA Governor Philip Lowe noting the “4 percentage point increase in official rates since May last year was working to create a more sustainable balance between supply and demand in the economy and will continue to do so2.”

However, he also indicated the RBA was prepared to resume rate increases if economic conditions warranted it and reiterated the board’s priority was to return inflation to target within a “reasonable timeframe”.

“Some further tightening of monetary policy may be required to ensure inflation returns to target in a reasonable timeframe, but that will depend on how the economy and inflation evolve,” Lowe said in a statement accompanying the July decision to pause rates.

Monthly data shows headline inflation rose 5.6% in the 12 months to May, which was the smallest increase since April last year. While prices kept rising for most goods and services, the increases were smaller than those recorded in preceding months, according to the ABS.3

Governor Lowe also noted in his statement that wages growth had picked up in response to a continued tight labour market and high inflation.

“The board remains alert to the risk that expectations of ongoing high inflation will contribute to larger increases in both prices and wages, especially given the limited spare capacity in the economy and the still very low rate of unemployment,” he said.

The RBA’s expectation is the economy will grow as inflation returns to the 2-3% target range, but Lowe again said the “path to achieving this balance is a narrow one” – in a mantra the central bank has adopted for some time now.

GDP rose by 0.2%
in the March quarter.
GDP rose by 0.2%
in the March quarter.
The unemployment rate
remained low at 3.5% in June.
The unemployment rate
remained low at 3.5% in June.
The RBA lifted interest rates
twice in the June quarter
The RBA lifted interest rates
twice in the June quarter
Australia’s population growth
accelerated to 1.9% in
the year to December 2022.
Australia’s population growth
accelerated to 1.9% in
the year to December 2022.

  1. ABS (2023, 7 June), 12 things that happened in the Australian economy during the March quarter | Australian Bureau of Statistics ( [Press release]
  2. RBA (2023, 4 July), Statement by Philip Lowe, Governor: Monetary Policy Decision | Media Releases | RBA
  3. ABS (2023, June 28), Monthly CPI indicator annual rise of 5.6% in May 2023 | Australian Bureau of Statistics ( [Press release]

The Numbers

Annual GDP growth moderates 

decrease of 0.4%

source: ABS

Quarterly GDP growth continues to ease

slight decrease of 0.4%

source: ABS

Unemployment rate steadies

unemployment rate

Source: ABS

RBA cash rate target

Cash Rate increases by 0.25%

source: RBA

Chapter 3



It was the highest quarterly rise since January last year, according to CoreLogic, though national prices remain 6% below the previous high recorded in April 20221.

The ongoing lack of supply has created an environment favouring sellers, with capital city listings in the four weeks ending June 25 almost 20% lower than the same period last year2.

The overall pace of capital gains eased in the month of June, perhaps as a sign that sentiment was falling as interest rates bite.

Darwin was the only capital not to record a gain in the quarter, while regional housing values grew at a slower pace than major cities3.

Hans Wibawa

Investment Analyst

Low supply and post pandemic migration helped push national housing prices up by 2.8% in the June quarter, led by the Sydney and Brisbane markets.

  1. CoreLogic (July 3, 2023), Hedonic Home Value Index
  2. ibid
  3. ibid

Supply issues

In May, over 15,000 total dwellings were approved, a 20.6% increase from April but still 9.8% down on an annual basis1.

National Australia Bank’s Chief Executive Officer, Ross McEwan, called for urgent action to accelerate housing supply in an appearance before the House of Representatives Standing Committee on Economics in early July. He stated there is a “chronic undersupply of housing” and that “fast-tracking planning permissions and development would be the single most effective way” to reduce pressure2.

A forecast increase in Australia’s net overseas migration to 400,000 this financial year – 27% above the previous record set in 2008 – will create even more demand for housing. That demand will initially be felt in the rental market but ultimately extend to owner occupied property as permanent migrants purchase their own homes, according to CoreLogic.

Overall, the National Housing Finance and Investment Corporation expects the gap between supply and household formation to burgeon out to -106,300 dwellings between 2023- 2027 as a result of rising material costs and supply chain issues3.

  1. ABS, (May 2023), Building Approvals Australia – May 2023
  2. Australian Financial Review, (12 July, 2023), NAB boss delivers urgent housing supply warning
  3. NHFIC, (3, April 2023), State of the Nation’s Housing Report 2022-23

Rental market eases

There are early signs annual growth in rent is easing across the combined capitals but it remains high versus previous years, reaching well into double digits for units in major cities and hovering around 10% for houses.



Increased migration was a major factor in annual rent appreciation for units, which reached as much as 18.8% in Sydney in the year to June 30. Perth clocked up the biggest annual increase in rents for houses (13.1%) and Melbourne followed with a 10.6% gain1.

Rental vacancy rates across the combined capital are also rising (to 1.1% on June 30) but, nonetheless, remain well below the decade average of 2.8%2.

CoreLogic argues an increase in the size of the average household in response to rising costs means rental appreciation will moderate further over time.

  1. CoreLogic (July 3, 2023), Hedonic Home Value Index,
  2. ibid

Market snapshot

  1. Corelogic, SQM Research residential vacancy rates
Chapter 4

Industrial & Logistics

Key Insights

With most markets around the country recording severe supply shortages for warehouse and industrial premises, vacancy rates continue to reflect extremely tight leasing conditions. According to CBRE, Australia’s industrial and logistics sector has the lowest national vacancy rate in the world, while Sydney’s vacancy rate, at 0.2% for the first half of 2023, is the lowest of any city worldwide1.

Hans Wibawa

Investment Analyst

Industrial and logistics property has been the standout segment of commercial property since the onset of the COVID pandemic.

  1. CBRE Research, (July 2023) Australia Industrial and Logistics Vacancy 1H23

Signs of easing vacancy rates

Persistent undersupply is likely to keep vacancy rates at very low levels for the rest of the year, but there are early signs that rental markets may be beginning to relax. JLL reports some companies have started subleasing warehouse space that now are surplus to their requirements as supply chains return to normal following disruptions due to pandemic restrictions1.

Leasing inquiry levels have also returned to normal after reaching record highs in 2021 and 2022, according to Colliers, although it notes that an extra 2.9 million square metres of vacant space would be needed before market rental growth was affected1.

As the market stands, rents have risen 5.3% over the second quarter of 2023, and 40% over the past 18 months, according to Colliers research reported in the Australian Financial Review2.

With rents rising and vacancy rates tight, capital values for prime industrial property increased 3.6% nationally over second quarter to $3420 per square metre, while yields rose 18 basis points to 5.27%, the Australian Financial Review reports3.

As in previous quarters, most stock under construction is pre-committed, meaning supply shortages are unlikely to abate for many months to come.

Vacancy rates 1H 2023

Super prime net face rental growth 2Q23

  1. JLL, (June 22,2023), Warehouse subleases give hope to hamstrung tenants
  2. Property Australia, (July 12, 2023), Industrial values continue to rise
  3. Larry Schlesinger, Australian Financial Review, (July 3, 2023), Industrial property up 4pc in three months on the back of rental surge
  4. ibid

Market Overview


Consistent with previous quarters, Melbourne vacancy rates remain at a record low of 1.1% and rents continue to rise, particularly for prime grade properties. According to CBRE, average super prime rents increased by 7.6% in the second quarter, while prime and secondary rents increased by 6.2% and 5.6%, respectively1.

Almost 87,500 square metres of floorspace was added to the market in the second quarter. Over the full calendar year, Melbourne is expected to gain almost 900,000 square metres of industrial space, but 78% of this space is already precommitted2, so it is unlikely there will be a significant impact on vacancy rates.

Melbourne’s vacancy rates remain at a historic low of 1.1%, leading to rising rents, especially for prime grade properties. Second quarter data indicates a 7.6% increase in average super prime rents, while prime and secondary rents rose by 6.2% and 5.6% respectively.



Average vacancy rates in Sydney, at just 0.2%, are the lowest of any city worldwide3. The chronic supply shortages are constraining activity in the market and fuelling rental growth.

The development pipeline in Sydney is 143% larger than the long run average, which should ease the pressure over the quarters to come, but like elsewhere most of the supply due for completion in 2023 is pre-committed4.

Sydney super prime rents increased by 5.4% and prime rents rose by 5.9% in the quarter5.

Sydney boasts the world’s lowest average vacancy rates at a mere 0.2%. Severe supply shortages are constraining the market and driving rental growth. Super prime rents in Sydney increased by 5.4%, while prime rents saw a 5.9% rise in the last quarter.



In Brisbane, 36% of the 705,000 square metres of new floorspace expected to be added over the year was completed in the second quarter, a 31% increase on the previous quarter’s levels. However, as in other cities, supply shortages persist, with 90% of the supply pre-committed6.

Vacancy rates in Brisbane remain at record lows: 0.6% for the first half. As in other cities, tight supply has driven rental growth higher. Prime net face rents increased by 7.7% in the city’s North over the quarter, by 4.4% in the Australia Trade Coast precinct, and 4.1% in the Outer South7.

With additional supply due for completion over the coming quarters, vacancy rates and rents may stabilise in the near term, but Brisbane’s long-term growth prospects are expected to hold demand above historic levels.

Vacancy rates in Brisbane’s first half were at a record low of 0.6%, driving rental growth. Prime net face rents saw notable increases, with 7.7% in the city’s North, 4.4% in the Australia Trade Coast precinct, and 4.1% in the Outer South.

  1. CBRE Research, (July 10, 2023), Figures Melbourne Industrial and Logistics 2Q23
  2. ibid
  3. CBRE Research, (July 10, 2023), Figures Sydney Industrial and Logistics 2Q23
  4. ibid
  5. ibid
  6. CBRE Research, (July 10, 2023), Figures Brisbane Industrial and Logistics 2Q23
  7. ibid
Chapter 5


Headwinds persist

According to a CBRE report released in May, national prime market net absorption is only slightly below its 20-year average of around 143,100 square metres1.

A relatively wide dispersion between cities is evident as a result of key drivers of activity. Brisbane has proved a standout in terms of rental growth as supply struggles to match its expanding population and employment growth. Meanwhile, Melbourne is forecast by Colliers to record growth in underlying demand in the near term2.

A key question for the sector is the extent to which assets may be revalued as a result of factors such as rising interest rates and entrenched working-from-home practices. Office values in unlisted property funds fell by over 5% in the June quarter, according to MSCI Real Assets,3 and major superannuation funds are also reported to have written down their office exposures in recent months.

As a result, market commentators will be keeping a watchful eye on the office sector as the rest of 2023 plays out.

Andrew Turner

Founder and CEO

Australia’s office market is facing similar headwinds to other countries but prime space continues to provide relatively solid results.

  1. CBRE (2023, May 28), Australian Office Market Q1 2023 | CBRE Australia
  2. Colliers (June 2023), Insights & Outlook: Offices
  3. AFR, (2023, July 13), “Office values slump 5pc for unlisted funds in June: MSCI”


Melbourne CBD 

A flight to quality continues to be reflected in positive net absorption rate for prime office space as employers seek to woo staff in a tight labour market, according to Cushman and Wakefield1.

Prime net effective rents are $395 per square metre per annum, representing a year-on-year decline of 3.7%2.

Colliers has identified the Victorian capital as among the international cities likely to experience growth in underlying demand for offices moving forward – a view based on factors such as percentage changes in capital values over the past 12 months, prospects for further change and the city’s long-term economic outlook3.

“Melbourne may see further capital value adjustments as yields move out, but the rental outlook is optimistic and the long-term economic growth story is very positive,” the Colliers team noted4.


Sydney CBD 

Overall vacancies remain elevated but tenant demand for prime space is strong as the flight to quality evident since COVID-19 continues to play out.

According to CBRE, rental growth has accelerated across the CBD with the average prime net face rental rate ending the second quarter at $1,078 per square metre – an increase of 6.2% year on year5. Elsewhere, rental rates were mixed. Areas close to the CBD such as North Sydney and the city fringe recorded strong growth, but other areas had only mild increases or even contractions6.

New supply of CBD office space is expected to be limited for the remainder of 2023. Cushman and Wakefield reports that around 70,000 square metres of refurbished office space will become available –with 80% coming online in the second half of the year7.


Brisbane CBD 

Rental growth in the Queensland capital has been strong across property grades as a lack of supply and rising inflation combined to push up gross face rents in the first half of the year. Indeed, Savills has singled out Brisbane as a market which has experienced a particularly strong increase in demand for office space as a result of both employment growth and net interstate migration8. Population inflow from other states reached the highest annual level in more than a decade in September last year9.

The fact that no additions to supply are planned for 2023 means positive net absorption is likely to continue into the latter half of 2024.

Prime gross effective rents are $485 per square metres per annum, a year-on-year increase of 10.2% – and continued pressure on rents is likely until new supply is complete.10

Vacancy rate
for Melbourne CBD