Brisbane's economy is on the up and up, expected to grow by more than 50 per cent over the next 15 years. It's the engine room of Queensland, a city that's forecasted for great things. However, its commercial real estate market tends to lag behind at times, with results that often don't do justice to the positive growth of the city's economy.
With the help of our expert researchers and the team at Queensland commercial, we've put together a summary of the state of Brisbane's office market. By knowing more, you can make better decisions when it comes to leasing or buying in this market.
Vacancies decrease in non-strata market
Brisbane's strata office market has historically outperformed the broader office market in terms of total vacancies.
Brisbane's strata office market has historically outperformed the broader office market in terms of total vacancies. Since July 2012, strata offices have seen fewer vacancies than the rest of the market, with around half the number throughout both 2015 and 2016. This is most likely due to the prevalence of owner-occupier business in the city, and their preference for strata.
In January 2017, however, our data shows that something is changing in the market. Strata vacancies have increased to around 13 per cent - higher than they've been since at least July 2012. The rest of the market however, has experienced a two year low, with vacancies dropping slightly to around 15 per cent.
Increasing activity from private investors is most likely the reason behind the improvements in the wider office market, while increases in supply may be to blame for increasing strata vacancies. With strata vacancies at a high, this may be the best time for those looking for space to get into the market, as high vacancies usually put bargaining power back into the tenant's hands.
Positive net absorption
The six moths to January 2017 was particularly positive, with an impressive total take up of over 50,000sqm of space.
2016 saw a massive supply of new stock come onto the market, and promisingly we also saw positive net absorption for the first time since January 2013.
With such a large amount of new space coming to the market, this was a rare but welcome surprise.
The six months to January 2017 was particularly positive, with an impressive total take up of over 50,000sqm of space. If this trend can continue and vacancies are kept to reasonable levels, the Brisbane office market will only improve in the long run.
Despite capital value stagnation: 2016 was a record year for sales
An overwhelmingly positive year in sales, should help to improve sentiment around the Brisbane strata market coming into 2017. Last year certainly delivered with final sales figures of $50.6million - nearly double the annual amount we've seen since at least 2006.
These price decreases are the symptoms of high vacancies and a large supply of low quality stock on the market.
These sales were split evenly between retail and office, and showed most impressive growth in the retail sector mainly thanks to one large sale of $22million on Albert Street in the city's centre. It's likely that the low interest rate environment has played its part in bringing about this high turnover, driving owner occupiers to take control of their premises by buying instead of leasing.
A slight decrease in capital values may have also helped drive high sales figures with the average range dropping around 3.5 per cent from 2015 to 2016. It now sits at between $3,100/sqm and $7,200/sqm, the lowest it's been since 2011. These price decreases are the symptoms of high vacancies and a large supply of low quality stock on the market.
Rents stay still over 2016 and early 2017
After the global financial crisis rents dropped dramatically for office space in the Brisbane CBD. There were lows during late 2009 and early 2010 before a sustained period of rent increases which lasted for around two years. Rents began to steadily decrease again in 2012.
This slow decrease has continued for both prime and secondary space for the last four years or so and into 2016 and early 2017, seemingly unaffected by decreasing vacancies in the market.
The current average sits at $650/sqm for prime space, while secondary space sits at roughly $500/sqm. Unfortunately thanks to middling forecasts for white collar employment in the area and new stock coming onto the market, rents are unlikely to increase until the market absorbs excess stock.
While rents are stagnating and capital values are behaving similarly, the Brisbane office market is still showing signs of growth. With the right knowledge and a sound strategy, investors, tenants and owner occupiers can all get the best out of this promising market and avoid the rest.
