Brisbane CBD posts highest Q1 office rental growth amongst Australian cities

Net face rents grew by 2.9% in the city during the quarter.

Several key indicators are now pointing towards an improvement in the Australian office market fundamentals over the next year or two, according to Dexus Research. 

Net absorption in the Sydney and Melbourne CBDs turned positive in Q1 2024 after two negative quarters. 

Here’s more from Dexus Research:

Large consolidations within the financial sector were a drag on net absorption through 2023 and led to an increase in sublease space in the market. However, these consolidations are likely to have largely run their course with the big four banks and consulting firms having rationalised their space requirements. Sublease vacancy fell by 15,000 sqm in Sydney CBD in Q1 2024. 

Net face rents have grown in all markets through the quarter, with Brisbane CBD leading at 2.9%. The Brisbane and Perth CBDs continue to show the strongest improvement in vacancy, falling 2.5 ppts and 4.1 ppts in the past year respectively. Vacancy in Melbourne continues to diverge across precincts. The Eastern Core recorded falling vacancy in Q1 2024 down to 13.9%, whilst in the Docklands precinct vacancy increased to 21.4%. 

Occupancy rates in the CBD core, and in higher grade buildings, tend to be significantly higher than more peripheral CBD locations and lower grades. Relocating customers prefer these “super-core” buildings. For example, the Dexus office portfolio which has a bias towards quality core CBD assets has a high occupancy of 94.5%, well above the market average. 

A contraction in the forward supply pipeline will serve to protect existing stock from supply risk and support rent growth through the cycle. Rising construction costs, interest rates and vacancy have put pressure on the feasibility for uncommitted developments. Capital is also diverting towards sectors with higher returns, shown by an increase in planned non-office developments in CBDs.