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31 Mar
ACORPP Market Voice - Brisbane Commercial - Where are we?

With Matthew Buckley, Director ACORPP Brisbane


2016 saw the addition of more office space to the Brisbane CBD than has been completed in recent memory. The additions of 480 Queen St, 180 Ann Street and 1 William Street, combined to provide our CBD with an additional 180,000sqm of accommodation, or nearly 10% of the existing CBD, which shows absolutely phenomenal growth. The timing of these additions has had a dramatic effect on the CBD vacancy figures, however it’s important to understand that the reality is not nearly as rosy as the major agency houses would have us believe.

The greatest “distortion” of the results was in the Premium Grade, where 1 William Street was included (and included on a fully leased basis), as the State Government had already pre-committed to the entire building, excepting some minor retail spaces. According to figures previously released by the Property Council of Australia (PCA), the Premium Grade vacancy level was 21.2%, based on a total NLA (Net Lettable Area) of around 260,000sqm of space -  excluding this Government building.


Rising Market 2


If we do nothing but add the new building, fully leased, to the total (taking it to 330,000sqm), the vacancy rate - assuming no leasing was completed - is reduced to 17.4%. This accounts for around half the drop, now reported at 12.2%. The majority of the space leased in the Premium Grade was sub-lease accommodation and this was leased at significantly reduced rates. The actual reality is that there has been very little movement in the vacancy levels for direct lease floor space in Premium buildings. It has been recently reported that there are currently 150 whole floors available for lease in the CBD, so the ‘no vacancy’ signs are a long way from being displayed.

It’s also important to note that the net absorption figure of 95,000sqm (absorption is the amount of space or units leased within a market or submarket over a given period of time) was an all-time record for Brisbane. Again, this included the 70,000sqm 1 William St space, which drastically distorted the numbers. The figure also allows for a significant number of buildings which were vacated by various government departments, making way for the Queens Wharf development, or which have been removed from the office figures as they are being converted for alternate uses.  What hasn’t been included is the potential for 18,000sqm of space at 180 Ann St to be listed as vacant again, with doubts growing over the lease to Tatt’s Group following the merger with TabCorp. 




So, now that the outstanding results have been put in context, what is really going on in the Brisbane leasing market?  Well, there has been a drop in the overall vacancy rates and the removal of stock (rentable space available) and flight to quality or upgrading as seen in the A grade market (reducing from 13.9% to 11.9%) means that the overall market is improving for landlords.  Further highlighting this point has been the continued decline in B Grade (18.7% up to 19.7%) and C Grade (17.5% up to 19.6%). D grade fell however, this was driven by stock removal rather than leasing activity. 

The falls that we have seen in face rents will stabilise and the levels of incentives for tenants will also stabilise. Many landlords still hold significant vacancies and speculative fit outs will continue with these spaces being generally well received by the market.

There are no new buildings expected for the next 24 months and there will be slow absorption of the office space in the CBD. The cost of space and lack of space which drove many tenants from the CBD has now been reversed and the move back the CBD for many companies is now a very real and viable alternative.  Whilst the parking cost is higher, the public transport options are always better and therefore for the CBD will remain a preferred option.  The vacancy rates in the fringe areas were reasonably stable (overall drop from 12.9% to 12.6%) and there are no new developments currently expected to be delivered in 2017.

The market is still vastly in favour of tenants and is expected to remain this way for the coming year however, as the vacancy levels now slowly fall, landlords will gradually be able to re-align their rent and incentive levels as supply demand steadies.


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