2024-10-18-莱坊-Brisbane_CBD_Office_Market_September_2024_10页_1mb

Brisbane CBD Office Market Summary (September 2024)

Core Market Overview

The Brisbane CBD office market has experienced significant rental growth and a notable decline in vacancy rates over the past year. Total vacancy has fallen to 9.5% in July 2024, the lowest level in over 10 years, with prime vacancy at 7.2%. Net absorption for H1 2024 reached 26,552 sqm, driven by strong demand from the government and professional services sectors.

Key Market Indicators

• Total Vacancy Rate: 9.5% (July 2024), down from 11.7% at the start of the year.
• Prime Vacancy Rate: 7.2% (July 2024), with strong net absorption of 73,960 sqm.
• Prime Gross Effective Rent Growth: Forecast at 6.2% for 2024.
• Prime Yield: 7.25%, with a softening of 195 bps since Q1-2022.
• Secondary Vacancy Rate: 12.9%, with a negative net absorption of -60,090 sqm in H1 2024.

Market Trends

• Rental Growth: Prime face rent growth has been robust, with an average of $934/sqm and a 10.7% effective rent increase over 12 months.
• Tenant Activity: Tenant mobility has eased, with more companies opting to re-sign rather than relocate. Major firms such as EY, BHP, and Santos have re-committed to their existing premises.
• Net Absorption Forecast: Net absorption is expected to remain positive but subdued in 2025, with a projected 13,870 sqm of net absorption for the year.
• Supply Constraints: New supply remains limited, with only a few developments expected to complete by mid-2025. The lack of new construction is expected to support vacancy rates below 10% until H2 2025.

Economic Context

• Inflation: Quarterly inflation rose to 3.8% in Q2-24, but is expected to fall back into the RBA target zone by late 2025.
• Monetary Policy: The cash rate is likely to remain at its peak for this cycle, with easing expected in Q1 2025. Global rate cuts are anticipated to influence Australian markets.
• GDP Growth: Annual GDP growth for Q2-24 was 1.0%, with a forecast of 2.1% for 2025.
• Population Growth: Queensland recorded 2.6% annual population growth to December 2023, with 62% of this growth from offshore migration.

Office Workforce Growth

• Office workforce growth is expected to recover in 2025 to 2.7% annual uplift.
• Longer-term forecasts suggest growth between 2.0 - 2.5% annually, outpacing other major markets.

Major Office Supply Developments

• Major Refurbishments: 70 Eagle St (11,476 sqm) and 140 Elizabeth St (9,908 sqm) are expected to complete in mid-2025.
• Under Construction: 205 North Quay (43,700 sqm) is set to complete in March 2025, with staged tenant relocations. 360 Queen St (46,700 sqm) is expected to complete in H2 2025. Waterfront Brisbane North (72,500 sqm) is targeted for completion in 2028.
• Development Approved: Several projects are in the planning or mooted stages, including 150 Elizabeth St, 101 Albert St, and 135 Eagle St.

Investment Activity

• Investment transactions have increased, with $610.5 million in turnover for 2024 ytd, on track to exceed 2023's total.
• Significant sales include 240 Queen St ($250 million), 120 Edward St ($119 million), and 150 Charlotte St ($64.5 million), with the latter under unconditional contract for conversion to student accommodation.
• Buyer Interest: Buyer depth and breadth have improved, though most activity remains domestic. Offshore funds are showing increasing interest in Brisbane CBD assets.

Yield Trends

• Prime Yields: Softened further in Q2, with a median of 7.25% and a range of 6.0% - 8.25%.
• Secondary Yields: Median at 8.50%, with a range of 7.75% - 9.00%.
• Yield Forecast: Yields are expected to stabilize for the remainder of 2024, with further softening anticipated in the long term.

Challenges and Outlook

• Feasibility Hurdles: New commercial developments face financial and planning challenges, with construction costs and extended timelines limiting supply.
• Tenant Mobility: Reduced tenant mobility and increased capital costs are expected to slow face rent growth in the coming year.
• Economic Outlook: Economic growth is expected to remain steady but slow through 2025, with potential acceleration in 2026-2029 as supply constraints ease.

Contact Information

• Jennelle Wilson - Partner, Research & Consulting
  Email: Jennelle.Wilson@au.knightfrank.com
  Phone: +61732468830

• Mark McCann - Office Leasing
  Email: Mark.mcCann@au.knightfrank.com
  Phone: +61732468853

• Justin Bond - Capital Markets
  Email: Justin.bond@au.knightfrank.com
  Phone: +617 3246 8872

• Ben Burston - Research & Consulting
  Email: Ben.Burston@au.knightfrank.com
  Phone: +61290366756

• Matt Barker - Investment Sales
  Email: Matthew.Barker@au.knightfrank.com
  Phone: +61732468810

• Blake Goddard - Investment Sales
  Email: Blake.Goddard@au.knightfrank.com
  Phone: +617 3246 8848

• Peter Zischke - Valuation & Advisory
  Email: Peter.Zischke@qld.knightfrankval.com
  Phone: +617 3193 6811