Brisbane CBD office vacancy rate hits 4-year low of 11.1% in Q4

Net absorption was at 9,200sqm during the quarter.

According to JLL, the Brisbane CBD office market recorded positive 9,200 sqm of net absorption over the quarter. Strong demand in the market was driven by the Commonwealth Government and utilities companies, as well as centralisation activity. 

The Brisbane CBD vacancy rate fell to 11.1%, which was the lowest vacancy rate since 2019.

Here’s more from JLL:

The Brisbane Near City market recorded positive 26,100 sqm of net absorption over Q4 2023. This strong figure was the result of the Commonwealth Government taking up the entirety of 895 Ann Street (23,222 sqm) which completed in Q3 2023. Positive demand resulted in the Near City vacancy rate decreasing by 1.9 percentage points to 13.1%. This was the lowest vacancy rate in the market since 2013.

Supply still very limited in Brisbane

There were no new office completions recorded in the CBD or Near City over Q4 2023. Challenges with construction remain, such as the lack of skilled labour and high material costs which has mothballed a number of office projects. The sizeable local infrastructure pipeline has put further pressure on the construction industry, as these projects have taken on a lot of skilled labour.

We are currently tracking 186,900 sqm of office supply across four projects that are under construction in the CBD. The largest of these projects is Waterfront Brisbane, 3-69 Eagle Street (69,000 sqm), scheduled to be completed in early 2028. A single small boutique office is currently under construction in the Near City and will add 1,620 sqm to the market in early 2024.

Some liquidity unlocked for larger offices

Prime net effective rents increased by 1.7% in the CBD and 1.2% in the Near City over the quarter. Strong levels of demand over the past year of 2023 in both markets have supported growth, with annual rent growth totalling 17.0% for the CBD and 7.5% in the Near City. A combination of face rent growth and a minor decrease in incentives have supported effective rent increases over 2023.

Prime yields in the CBD softened by 12 basis points (bps) on the upper end over the quarter to range between 5.50%-7.00%, with a midpoint yield of 6.25%. Near City prime yields were unchanged in the quarter, ranging from 6.00%-7.75% with a midpoint of 6.88%.

Outlook: Lack of new supply should keep vacancy low

After an active 2023, Government tenants are anticipated to have more modest participation in 2024 and the private sector is expected to play a bigger role in the demand story for Brisbane. Tenants are still looking for quality office space to attract workers back to the office as well as meeting their organisation’s ESG targets. Larger contiguous space options for such spaces are becoming scarce.

The Brisbane office market has demonstrated resilience over 2023. There are expectations that interest rates will stabilise in the first half of 2024, which might give confidence for buyers to be more active in the market. With the lack of supply in the near term, vacancy rates across the CBD and Near City are projected to remain around their current low levels.

Note: Brisbane Office refers to Brisbane's CBD office market (all grades).