Brisbane office transactions at highest level in 10 years

kimberlyjones

Queensland’s growing economy and over $44 billion of public and private sector infrastructure projects were a major drawcard for investment in the Brisbane office market. Notably, the resource sector has recovered, interstate migration is now the highest nationally, and the tourism sector has rebounded.

As per the latest CBD Office Report from Colliers International circa $2.35 billion in office sales took place in 2018 compared to circa $1.47 billion in 2017, an increase of 60 per cent.

Cross border investment from offshore increased from $891 million in 2017 to $1.77 billion in 2018, with capital flowing from Canada, United Kingdom, United States, Singapore and Germany.

“We expect increased interest from offshore and domestic institutional investors in 2019 as the value proposition of the Brisbane CBD office market lays on the Australian AAA credit rating, and the spreads in the range of 25bp to 120bp compared to the Sydney and Melbourne CBD office markets,” said Jason Lynch, National Director of Capital Markets at Colliers International.

“Tangible signs of a leasing market recovery in Brisbane supported by the improved Queensland economic fundamentals including the mining sector recovery, the large infrastructure pipeline, and strong interstate migration has also increased the prevalence of counter-cyclical investors.

“Constrained supply of new developments is expected to continue in 2019 on the back of low risk appetite from Australian developers holding back the construction of new developments until pre-commitments are confirmed. This is a positive from an investor perspective,” said Mr Lynch.

The Brisbane CBD has seen a total of 46,931sqm in positive net absorption during calendar year 2018 and a total of 102,120sqm over the past three years averaging 34,040sqm per annum over this period.

The Brisbane CBD has also seen a total of 139,613sqm in withdrawals and a total of 209,290sqm in new supply indicating a total positive supply of 69,677sqm over the past three years.

Prime grade vacancy in the CBD at the end of the year was at 10.0%, whilst secondary grade vacancy was at 16.9%.

“With overall vacancy rate at a 5-year low, and growing white-collar employment in the CBD we envisage increased leasing activity and tighter vacancy over the years ahead,” said Karina Salas, Research Manager at Colliers International.

“According to Deloitte Access Economics, the white-collar employment market in the Brisbane CBD is set to gradually grow at an average of 2,820 persons per year over the next seven years to 2025.

“We estimate this will result in absorption of circa 30,000sqm of additional office accommodation annually.

“With no new supply of premium assets available until 2022 and circa 17,400 sqm of new leases of vacant premium office relocating in 2019, we are forecasting a reduction in vacancy rates from the current 10.4% down to levels below 6% by 2020.

The new development at 80 Ann Street, scheduled for completion by 2022, is the only premium building under construction and about 70% of the net lettable area is already committed to Suncorp,” said Mrs Salas