Brisbane office market must transition
Record high vacancy in Brisbane’s CBD office market is a clear indication of the need for a coordinated strategy to facilitate the transformation and re-lifting of older office buildings, according to the Property Council of Australia.
The Property Council of Australia’s mid-year Office Market Report has recorded a vacancy rate of 14.7 per cent in Brisbane’s CBD, the highest level since the report’s inception in 1990, Queensland Executive Director of the Property Council of Australia, Kathy Mac Dermott says.
“Market conditions in recent years have conspired to create a serious and potentially long-term challenge for Brisbane’s CBD.
“We have seen, and will continue to see, world class premium office developments appear on our city’s skyline.
“These buildings are the blue-chip asset being sought by global investors and they provide the type of office accommodation sought by the world’s leading companies.
“They deliver the investment grade assets and office accommodation befitting Australia’s New World City.
“However this evolution of Brisbane’s office market has created some challenges.
“Vacancy across all grades of office accommodation is high, with all grades now reporting vacancy above 10 per cent for two consecutive reports. It is unlikely that demand will bounce back strongly enough to digest this volume of office space in the short-term.
“In particular, we are now experiencing a very high vacancy rate in the secondary office sector as the city begins the transition away from the office accommodation of the past, to the office accommodation of the future.
“Vacancy in the B grade segment has tipped over 20 per cent. A continued ‘flight to quality’ will result in this market segment continuing to experience above average vacancy for some time.
“While our city will always need a mix of office accommodation, we are currently too heavily weighted to secondary stock. The city needs to rebalance or we risk a backlash from investors.
“We also risk a diminishment in the CBD’s offer to residents and visitors as a vibrant city heart.
“A rebalance will only be achieved if the industry and government come together to build a coordinated strategy to promote and facilitate the reuse of these buildings. A similar strategy – Postcode 3000 – was successful in Melbourne in the early 1990s and provides a blueprint for us to follow.
“Outside of the CBD, vacancy in the fringe decreased slightly from 12.7 per cent in January to 12.2 per cent in July.”
Analysis & Commentary – Brisbane CBD, July 2014
Headline comments:
- Brisbane CBD vacancy increased in the 6 months to July 2014 to a new record high
- This was mainly due to negative demand
- There is a significant amount of space due to come online from 2015
Vacancy analysis:
- Brisbane CBD’s vacancy rate increased from 14.2 per cent to 14.7 per cent, up from the previous record high six months ago
- This was mainly due to negative demand
- Net absorption was -9,431sqm
- Supply additions totaled 9,979sqm
- There were 9,118sqm of withdrawals
Future supply:
- A total of 3,113sqm is due to enter the market in the second half of 2014
- 59,565sqm is planned for 2015
- Then, a further 128,853sqm is due to come online from 2016 onwards
- 239,081sqm of space is mooted
Key market indicators, Brisbane CBD (aggregate)
| Grade | Vacancy, Jul 14 (%) | Vacancy, Jan 14 (%) | Net absorption, 6 months to Jul 14 (sqm) | Net absorption, 12 months to Jul 14 (sqm) |
| Premium | 14.2 | 12.8 | -2,831 | -4,555 |
| A | 10.2 | 10.6 | 2,838 | -12,083 |
| B | 20.1 | 18.7 | -10,958 | -31,7 |
| C | 11.7 | 12.6 | 1,919 | 4,445 |
| D | 16.8 | 16.1 | -399 | -429 |
| Total | 14.7 | 14.2 | -9,431 | -44,129 |
Analysis & Commentary, Brisbane Fringe, July 2014
Headline comments:
- The Fringe market’s vacancy decreased over the period
- This was mainly due to positive demand
- Only A Grade space reported an increase in vacancy over the period
Vacancy analysis:
- Brisbane Fringe’s vacancy decreased from 12.7 per cent to 12.2 per cent
- This was mainly due to 17,204sqm of net absorption
- 14,733sqm of space was added over the period, while 1,531sqm was withdrawn
- Only A Grade space reported an increase in vacancy over the period
- D Grade vacancy remained at zero
Future supply:
- A total of 31,920sqm is due to enter the market in the second half of 2014
- 16,0sqm is due to be completed in 2015
- 22,000sqm is planned for to come online from 2016 onwards
- 96,748sqm is mooted for this market
Key market indicators, Brisbane Fringe (aggregate)
| Grade | Vacancy, Jul 14 (%) | Vacancy, Jan 14 (%) | Net absorption, 6 months to Jul 14 (sqm) | Net absorption, 12 months to Jul 14 (sqm) |
| A | 9.9 | 9.3 | 7,543 | 6,470 |
| B | 16.0 | 17.5 | 4,677 | 2,939 |
| C | 12.6 | 14.5 | 4,984 | -16,684 |
| D | 0.0 | 0.0 | 0 | 0 |
| Total | 12.2 | 12.7 | 17,204 | -7,275 |
Media contact
Kathy Mac Dermott
Queensland Executive Director
07 3225 3000 or 0427 243 986
John Nguyen
National Research Manager
02 9033 1943 or 0410 449 210
For more information, visit www.propertyoz.com.au/officemarketreport