Brisbane’s office leasing market dominated by large occupiers | Real Estate Asia
, Australia

Brisbane’s office leasing market dominated by large occupiers

Tenants requiring over 1,000sqm accounted for 8,900 sqm of gross take-up in the CBD alone.

The Brisbane CBD and Near City recorded 11,800 sqm and 7,600 sqm of net absorption over the last quarter of 2021, respectively. 

According to JLL, demand in both markets was driven by large occupier moves (>1,000 sqm) as a degree of normalcy returned. Large tenants accounted for 8,900 sqm and 11,500 sqm of gross take-up across the CBD and Near City market, respectively.

Here’s more from JLL:

The vacancy rate in the Brisbane CBD market declined marginally to 15.5%, while the Near City market vacancy rate decreased 0.5% to 17.9% over the quarter. Vacancy rates in both markets remain elevated and are still above their respective 10-year quarterly averages.

The supply pipeline remains substantial across the market

Two projects are currently under construction in the Brisbane CBD. The first is expected to complete in 1Q22 totalling 60,200 sqm, and the other, totalling 44,300 sqm is expected to complete in 4Q24. Five projects remain under construction in the Near City market, with four projects totalling 65,100 sqm expected to complete during 2022, with the remaining 23,200 sqm to complete in 1Q23.

Apart from these under construction projects, there are 24 projects marked as plans approved, totalling 616,600 sqm. Of this, 10 (314,000 sqm) and 14 (302,700 sqm) projects have been approved for the Brisbane CBD and Near City, respectively. Completion dates have not been estimated for much of this future stock as construction is unlikely to commence unless significant pre-commitment is secured.

Prime gross effective rents decrease slightly in the Brisbane CBD

Prime gross effective rents (PGER) in the Brisbane CBD decreased 1.2% over the quarter to AUD 387 per sqm per annum , a 5.1% decrease y-o-y. The Near City market recorded no change to PGER at AUD 290 per sqm. Prime incentives increased in the Brisbane CBD market by 0.9% to 43.0%. Incentives in the Near City market increased to 43.6%.

Yields in the Brisbane office market remain unchanged over the quarter, the CBD market yield range is 5.00%-6.25% and the Near City market yield range is 5.75%-7.25% for the fourth consecutive quarter.

Outlook: Uncertainty will prevail in 1H22, 2H22 will see normalisation

Uncertainty has returned to the occupier market, as a new variant of the COVID-19 spurs case numbers to record highs and this time the economic support from the government is less forthcoming so far. We anticipate some hesitancy by large occupiers to office space commitments in 1H22. Small tenant activity will continue to build momentum.

Investors are likely to remain selective with the types of office assets they pursue. Well leased assets with strong covenants are likely to remain attractive as well as assets with development potential as the world pivots to a new work environment post COVID-19.

 

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

 

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