This article is from the Australian Property Journal archive
POSITIVE tenant demand coupled with the withdrawal of space to make way for the Cross River Rail project has helped the Brisbane CBD office vacancy rate fall for the consecutive period, from 14.7% to 13%.
The Property Council’s Office Market Report shows recorded an absorption rate of 25,192sqm over the past six months – a great indicator of positive activity in the economy.
PCA Queensland executive director Chris Mountford said this high-level leasing activity has been concentrated in the A and B grade segments, continuing the flight-to-quality pattern that has been established in previous years.
“This is a strong result for the Brisbane CBD. With an additional 47,700sqm of space entering the market later this year, the city should be well placed to absorb this new supply.
“Positive tenant demand was also witnessed in the Brisbane fringe, with 12,808sqm of net absorption recorded over the six months to January.
“While the vacancy rate edged up slightly, from 14.6% to 14.8%, the result can be largely attributed to 16,729sqm of supply entering the market,” he added.
Savills office leasing manager Daniel Boyes said leasing enquiry had continued to strengthen. Key lease deals in 2018 included Suncorp for 39,600sqm at 80 Ann Street; Deloitte for 8,000sqm at 123 Eagle Street; the state government for 5,319sqm Capital Hill; and Sonic Healthcare for 2,138sqm at 545 Queen Street.
“The CBD has seen several new additions with WeWork, Hub and various other groups absorbing large portions of space.
“Demand for smaller fitted suites has also seen consistent growth despite a significant increase in supply,” Boyes added.
JLL’s QLD head of office leasing Adam Barrett said incentives have stabilised and are likely to tighten by year end.
“In 2018, 2.8% rental growth was achieved and we expect stronger growth going forward. The economic backdrop for the Brisbane office market is already much stronger than it has been in recent years and we expect further improvement.
“The strong pipeline of committed infrastructure projects should directly boost demand for office space, while also providing an indirect boost to overall economic activity and sentiment. The prospect for a further lift in population growth is also likely to be a strong driver of a broader pick-up in economic activity.
“Tenants above 5,000sqm now have limited options; this could act as a catalyst to kick-start another development in the CBD.” Barrett predicted.
Colliers office leasing national director Matt Kearney said whilst the vacancy rate is likely to stagnate in early 2020 due to the completion of 300 George Street and 12 Creek Street – The Annexe, “beyond this time we may see a gradual improvement in the vacancy rate due to Queensland’s improving economic environment and limited new supply.”
The PCA reported that vacancy rates also decreased on the Gold Coast, from 12% to 11.6%.
“Market activity has been positive in the Robina-Varsity Lakes, Southport and Surfers Paradise locales, with 2,986sqm of net absorption being recorded across the Coast markets over the period. With little new stock on the horizon, vacancy rates can be expected to tighten further in 2019,”
Mountford said the Sunshine Coast has seen an increase in vacancy rates from January 2018, which can be attributed to new supply additions.
“Despite positive absorption of 5,334sqm, total vacancy on the Sunshine Coast increased from 15% in January 2018 to 21.8% in January 2019 – attributable to an additional 21,716sqm that has entered the market in the last 12 months.
“With a significant amount of new space mooted to enter the market once the Maroochydore CBD is established, it is vital further consideration is given to future demands of the Sunshine Coast office market, and potential alternative uses for space within the new CBD,” Mountford concluded.
Australian Property Journal
