Office market in transition
The vacancy rate in Brisbane’s CBD office market has declined for the first time in three years, according to the Property Council of Australia’s latest Office Market Report released today.
After reaching a record high of 15.5 per cent in January this year, the decline to 15 per cent in July is a result of 36,096 square metres being withdrawn from the market, in a sign that renewal and conversion is occurring in the Brisbane office market, says Chris Mountford, Queensland Executive Director of the Property Council of Australia.
“Given the demand for office space remains in negative territory and almost 200,000 square metres of new space will be entering the market over the next 18 months, there is increasing pressure on owners to reposition older assets to take advantage of new markets.
“While there has been some demand for B grade stock, the majority of the fall in vacancy from 22.6 per cent in January to 19.2 per cent in July can be attributed to stock being withdrawn from the market.
“Policies introduced by Brisbane City Council have kicked started the conversion of older office buildings in the CBD into new uses such as hotels and student accommodation.
“However, with the amount of new stock entering the market and a continued ‘flight to quality’, further options for conversion and adaptive reuse need to be considered.
“While the headline figure has softened slightly, overall demand for office accommodation weakened over the past six months, with -19,160 square metres of total absorption recorded over the past six months.
“The premium end of the office market experienced a slight increase in the vacancy rate from 9.1 to 9.3 per cent over the 6 months to July, but remains the strongest sector of the market.
“A similar story can be seen in Brisbane’s fringe market with the vacancy rate decreasing from 12.8 per cent to 12.6 per cent as a result of 22,493 square metres being withdrawn from the market.
“Only the fringe’s A grade segment recorded positive demand with net absorption of 13,648 square metres in the 6 months to July.”
Analysis & Commentary – Brisbane CBD, July 2015
Headline comments:
- Brisbane CBD vacancy decreased in the 6 months to July 2015
- This was due to withdrawals
- Demand was still negative
- There is a steady stream of space due to come online over the next 18 months
Vacancy analysis:
- Brisbane CBD’s vacancy rate decreased from its record high 15.5 per cent to 15.0 per cent
- This was due to 36,096sqm of withdrawals
- Demand was still negative with -19,160sqm of net absorption recorded
- Only the B Grade segment recorded significant positive demand
Future supply:
- A total of 62,460sqm is due to enter the market in the second half of 2015
- 132,708sqm is planned for 2016
- 112,459sqm of space is mooted
Key market indicators, Brisbane CBD (aggregate)
Analysis & Commentary – Brisbane Fringe, July 2015
Headline comments:
- The Fringe market’s vacancy decreased over the period
- This was due to withdrawals
- All grades have double digit vacancy
- Only the A Grade segment recorded positive demand
Vacancy analysis:
- Brisbane Fringe’s vacancy decreased from 12.8 percent to 12.6 per cent
- This was due to 22,493sqm of withdrawals
- Supply additions totaled 16,610sqm while net absorption was -2,968sqm
- All grades of space have double digit vacancy
- Only the A Grade segment recorded positive net absorption
Future supply:
- A total of 2,860sqm is due to enter the market in the second half of 2015
- 22,000sqm is due to be completed in 2016
- This will be followed by 25,000sqm from 2017 onwards
- 40,648sqm is mooted for this market
Media contact: Chris Mountford |M 0408 469 734 |E [email protected]