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News

08 Feb
Has the Brisbane office market really turned around?

With Matt Buckley, Director ACORPP

The PCA released the office vacancy figures recently and all the commentary would have us believe the market has recovered and it’s all but a landlord market again; with rising face rents and falling incentives.  Vacancy did fall from 14.7% to 13.0% so the overall result is positive and there are very green shoots looking forward.  However, a closer review of the results and how they were achieved is critical to get a balanced view of our Brisbane office market.

Premium: Vacancy increased from 10.1% to 10.4%.  Yes, there may be significant leases in train and vacancy will most likely fall when next released in 6 months.  There will be backfill space however, so if we just review the result at a point in time, it’s actually worse than the last result.  It is still around 50% above the long-term average vacancy for this sector.

A & B: A Grade has fallen from 11.7% to 9.9% and B grade from 20.8% to 17.4% but about half of that reduction was through the withdrawal of space from the figures, rather than new entrants / expansion.  Yes, there’s been positive absorption which has seen real improvement, however the last time A grade had the vacancy rate below the current level was June 2013 and it remains well above the long-term average.

Brisbane image

Source: PCA

You will find a similar story with B grade not being below this vacancy level since Jan 2013. The fringe market vacancy also increased from 14.5% to 14.8%.  There has been a move back to the CBD as part of a flight to quality and the sheer availability and affordability over recent times.  Yes, there are tenants still moving out, the most high-profile being Aurizon’s move to 900 Ann Street, but many others have moved to the CBD creating backfill space in many areas.  In fact, every fringe market except Milton had an increase in vacancy levels over the reporting period so this isn’t a landlord market as yet.

Currently under construction in the CBD and to be delivered in 2019 are 300 George and 12 Creek Street, bringing around 56,000sqm, currently without any pre-commitment.  There are numerous further proposed towers however each of these are likely to proceed only with a significant pre-commitment and 80 Ann Street won’t be delivered for around 3-years.  Whilst there has been a slow down in construction from a few years ago, there is still new space being delivered which will serve to keep overall vacancy levels from falling too much in the coming 12-months.  Individual owners may well be able to complete leases on less aggressive terms as their asset has been leased.

Overall, there will continue to be excellent opportunities for tenants in the next 12-months across the Brisbane office market.

 

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