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19 Jul
Brisbane Commercial – what’s really going on?

With Matt Buckley, Director ACORPP

Financial services giant Suncorp have finally announced their new home – 80 Ann Street as the anchor tenant to a new 75,000sqm A grade office tower. The total floorspace of 80 Ann Street is in excess of Suncorp's requirements and will enter the market at a time when vacancy levels should have reduced to a more moderate level.

Another development, a second 50,000sqm tower at 360 - 380 Queen Street is a joint venture between Investa/Charter Hall is also likely to proceed. Tenants have been removed with demolition due to commence in the coming months.

Brisbane vacancy levels have been on the mind of industry commentators for the last 18-months and have generated mixed messages. The good news is the rate of positive absorption over the 12-months, with only 310 Ann Street returning after a major refurbishment. No new constructions have entered the market. 

80 Ann Street

Images: Artists impression, 80 Ann Street

The official vacancy rates are due to be released by the Property Council of Australia (PCA) in August, and we are expecting to see a fall in the CBD vacancy level, albeit still well above historical levels.  There will be no real relief for landlords. The overall CBD market vacancy is sitting at around 16% (the 10-year average is under 12%) with the biggest vacancies occurring in the lower grades. Vacancy levels in the premium office towers is within a range where there are options for tenants to move, so normal market parameters are in play. There are more vacancies in the A grade market, however, this varies from building to building. The levels of incentives achievable can vary significantly depending on how much a landlord is hurting. 

The B grade market hasn’t seen any signs of improvement. Tenants, generally, have been able to upgrade their accommodation for a reduction in passing rents that has created, in many cases, more pressure on older buildings. Upgrades to end-of-trip facilities, lifts, lobbies and air conditioning are being undertaken, however, many buildings have fundamental structural constraints around achieving some material upgrades. Fringe markets are starting to see a greater level on vacancy rates, although the impact can appear worse given the relatively small size of this sector. The relocation of a single larger tenant can have a significant impact on the vacancy level. 

Many of these tenants are looking to relocate back to the CBD as the reduced face rents and increased incentives have made it far more appealing. The advantages of street and off-street parking in the fringe areas, which originally drove these markets, has been notably tightened in recent times. This pressure on parking in fringe areas has played into the hands of the CBD. The public transport system might be flawed and require significant upgrades, but it is designed to bring passengers to the CBD – rather than the fringe areas.

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