Thursday 1 February 2024
Brisbane office space to remain in short supply
The office vacancy rate in the Brisbane CBD has remained steady, according to the latest figures from the Property Council’s Office Market Report, with vacancy levels likely to drop in future with new office projects continuing to be challenged by elevated construction costs.
Over the six months to January 2024, Brisbane’s CBD vacancy rate increased fractionally from 11.6 per cent to 11.7 per cent even though the total vacant space fell slightly to 273,576sqm, according to the latest Property Council Office Market Report. The “Premium” and “A Grade” segments of the office market are continuing to perform best.
Queensland Executive Director of the Property Council Jen Williams said available office space in Brisbane would likely remain limited for the foreseeable future.
“Brisbane has one of the most healthy and buoyant CBD office markets in Australia, with Canberra and Hobart being the only other major cities with lower CBD office vacancy rates,” Ms Williams said.
“The results also paint a positive picture for Brisbane’s fringe office market where demand is nearly four times the historical average.
“While there is some new office space in the development pipeline, 70 per cent of the stock set to be delivered in Brisbane up until 2026 is already pre-committed.
“Coupled with the fact that vacancy rates are at six per cent or less on the Gold Coast and Sunshine Coast, office space will be in short supply in South-East Queensland for at least the next few years and likely beyond that.
“The construction crisis is challenging new projects across all sectors, and this is especially true for the office sector due to the significant cost and complexity of financing, designing and building a new office building.
“The projects currently under construction such as 360 Queen Street, 205 North Quay and Waterfront Brisbane were all proposed in 2020 or prior.
“Unfortunately, the reality is that it is difficult to see how new office projects will stack up financially in the current market.
“As such, if we want to properly service the demand that is likely to occur in Brisbane over the next decade then we need to urgently review our planning and policy settings to ensure office buildings are feasible to develop,” Ms Williams said.
Knight Frank Partner Jennelle Wilson explained that she expected the latest results were just a pause in the overall continued downward trajectory of office vacancy rates in Brisbane.
“During 2024 we are still expecting to see Brisbane’s CBD office vacancy rate dip below 10 per cent due to ongoing demand and a lack of new office supply being delivered,” Ms Wilson said.
“In 2025 there may be a slight uptick in vacancy as new projects are completed but vacancy is likely to drop below 10 per cent again in 2027.
“While Premium remains the tightest market the best performing sector over the past six months has clearly been the A grade market with 40,071sqm of net absorption,” Ms Wilson said.
Prime market vacancy now sits at 10.2 per cent with strong market momentum pointing to further falls and continued rental growth.
Office vacancies are calculated on whether a lease is in place for office space, not whether the tenant’s employees are occupying the space or working from home.
Media contact: Bryn Moffatt l 043217 666 13 | [email protected]