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News

27 May
ACORPP MARKET VOICE - Brisbane grapples with office market strain

By Matt Buckley

 

The vacancy rate in the Brisbane CBD is at an all-time high of 15.6% with the greatest concern around B grade buildings which now have a vacancy of 23%. 

  

Total vacancy is 343,313sqm with 48,353sqm of that being sublease space.  Expectations are that the double digit vacancy will be with us for a decade with new supply to add pressure to the market. 

  

The downturn in the resource sector has been a contributor to much of the sublease space however, Brisbane is fortunate to have a broader and more stable industry spread using office accommodation compared to Perth.

 

Construction is underpinned by three major development

- 180 Brisbane (59,000sqm; 

- 480 Queen St (55,000sqm); and

- 1 William St (75,000sqm). 

 

There is also 58,000sqm mooted for 300 George St which will be within a mixed-use complex with hotel, residential and retail. Should this proceed, it is unlikely to enter the market until after 2018.

 

180 Brisbane will be completed in the last quarter of 2015 and at this time, the only major tenant announced for that building is CBA with around 10,000sqm. 

 

Brisbane has also seen white collar employment shrinkage over the past two years which placed further strain on the office market.  There will be continued pressure on face rents and increasing incentives as landlords look to limit the damage of vacancies.  Incentives of over 30% are commonplace and terms and conditions being achieved by tenants are better than have been seen for a long time. 

 

Again, there is a flight to quality being witnessed with the cost of superior accommodation now being affordable.  We are also seeing tenants who moved from the CBD in the last cycle where CBD vacancy was at all-time lows and rents at all-time highs, return to the CBD as the gap between rents in the CBD with the current incentive levels making the move back to the CBD more attractive.

 

B Grade buildings continue to bear the brunt of the market downturn and many owners are looking at strategies including refurbishment, spec fit outs or conversion into alternate uses.  An example is 363 Adelaide St which was removed from the market and is being converted into student accommodation.

Stock photo   Megaphone man

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