What are the largest upcoming office projects in Brisbane?
One of them is a 360,000sqm development at 360 Queen Street.
According to JLL, office leasing demand in Brisbane increased in 4Q22, particularly toward the end of the quarter. Brisbane CBD recorded about 22,000 sqm of positive net absorption, while the Near City market recorded about 18,900 sqm of net absorption.
The total vacancy rate for the CBD decreased 1.0 ppts to 13.9% in 4Q22, while the Near City vacancy rate decreased 1.0 ppts to 17.2%.
Here’s more from JLL:
The drivers of demand have been small tenant activity (<1,000 sqm) across both the CBD and Near City markets. The flight-to-quality theme remains as tenants continue to shift to quality space. Some of the aims of relocating into higher-quality space is to attract and retain talent, as well as to meet their organisation's ESG goals.
Low supply due to market uncertainty
The completion of 111 Boundary Street, West End added 6,511 sqm of new stock to the Near City market. There were no completions recorded in the CBD in 4Q22.
There are seven office projects currently under construction, which are expected to add a total of about 200,800 sqm of space to the CBD and Near City markets. These developments have scheduled completion dates between 2023 and 2025. Of these, the largest projects are 360 Queen Street (45,000 sqm) and 205 North Quay (44,312 sqm) in the CBD.
Transactions continue, however with increased investor scrutiny
Economic and market uncertainty continued to weigh on investor sentiment. Despite this, nine assets traded in the quarter, totalling AUD 684 million in the CBD and Near City markets. The largest transaction was JP Morgan Asset Management selling 53 Albert Street in the CBD to Nippon Telegraph & Telephone Corp. for AUD 150 million (50% share).
The prime yield range for the CBD and Near City was unchanged for 4Q22. Brisbane CBD secondary yields softened by 25 bps on both ends to range between 6.00%-7.25%. Brisbane Near City secondary yields softened by 25 bps on both ends to range between 6.25%-8.00%.
Outlook: Market bifurcation continues to be evident
From a leasing perspective, large tenant activity is expected in the near term as lease expiries may drive relocation decisions. Some of the 2023 expiries are a result of delayed decision making from the COVID-19 period.
The investment market is expected to remain bifurcated as elevated cost of debt as well as an uncertain economic environment impact decision making. However, prime quality assets backed by strong covenants and ESG credentials are expected to still attract healthy levels of investor interest.
Note: Brisbane Office refers to Brisbane's CBD office market (all grades).