Brisbane Grade A office vacancy drops to 14.9% in Q3
Demand is coming from firms trying to lure staff back to the office.
Premium and Grade A buildings are performing well in Brisbane. According to JLL, the city’s CBD office market recorded about 7,900 sqm of positive net absorption, while the Near City market recorded about 3,300 sqm of net absorption over 3Q22, with high interest in full-floor tenancies.
The drivers of demand for premium spaces included companies trying to entice staff back to the office, the need for a better work environment and corporates implementing ESG policies.
The report adds: Total vacancy for premium and Grade A stock decreased in the CBD over the quarter from 15.4% in 2Q22 to 14.9% in 3Q22. For Near City, this decreased from 18.5% in 2Q22 to 18.2% in 3Q22.
Here’s more from JLL:
Completion of the Queens Wharf major project, totaling 24,000 sqm, has been pushed to the next quarter. Two other projects in the Near City are also due for completion at the end of 2022, totalling 50,885 sqm. All three projects are in the Near City market.
The future supply pipeline remains strong with plans approved for 12 ongoing projects, totalling about 108,800 sqm for CBD and about 74,100 sqm for Near City. However, not all of the projects are expected to commence, given the current economic uncertainty, constrained labour markets and high construction costs.
Face rents increase while incentives remain high
CBD prime gross effective rents (PGER) increased by 1.4% over the quarter to AUD 404 per sqm per annum, marking an annual growth of 3.3%. PGER remained stable from the previous quarter in the Near City. However, incentives continue to remain elevated.
The prime yield range softened by 25 bps in the CBD (5.25%-6.50%), while the Near City market remained stable at 5.50%-7.25% for the quarter.
Outlook: Market sentiment plays a large factor
The current uncertain economic environment has seen market sentiment decrease. Landlords continue to push for increasing rents, while tenants’ demand for better space continues as they try to entice their employees back to the office.
However, landlords have also increasingly begun to factor in costs associated with occupancy.