Brisbane CBD Office Market

August, 2018

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Brisbane CBD office market at the start of a supply upswing as demand improves and vacancy falls

Brisbane at Start of Supply Upswing

According to the Property Council of Australia Office Market Report, whilst net absorption was negative over the year to June (-6,124 square metres), it was positive over the six-month period from January to July (21,739 square metres).  Net absorption was strongest in Premium-grade buildings over the first half of 2018.

Positive net absorption helped the vacancy rate decline from 16.1% in January to 14.6% in July.  Vacancy is now the lowest it has been since January 2014.  The prime vacancy rate is now 11.1% while the secondary vacancy rate is 19.3%.  The decline in the secondary vacancy rate during the first half of the year was boosted by the withdrawal of 12,063 square metres of space at the 360-380 Queen Street site.

There was no new supply added to the market over the first half of 2018, with the most recent supply completed being 300 Ann Street during 2017.

However, the CBD is at the start of a supply upswing with a number of projects in planning or under construction.  Notably, 300 George Street is well underway, with construction anticipated for the second half of 2019.  The project is yet to receive a pre-commitment.

Also, Mirvac has now secured Suncorp as a major tenant for 80 Ann Street.  80 Ann Street is mooted for completion in 2022.


Casey Robinson

National Research Specialist

View Profile > QLD
Michael Coverdale

Managing Director

View Profile > QLD

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Leasing Market Strengthens

Alongside a strengthening in occupier demand, rents grew over the 12-months to June 2018.  Incentives were stable over this period, and whilst they are considered to have peaked, their decline will be gradual.

According to m3property Research, Premium-grade gross face rents are currently typically ranging between $785 and $875 per square metre, with incentives averaging 35% and  A-grade gross face rents are typically ranging between $625 and $750 per square metre with incentives also averaging 35%.

Conditions in the secondary market remain difficult. B-grade face rents are typically ranging between $525 and $650 per square metre with an average incentive of 39%.  Secondary space that has been refurbished is generally being successfully leased.  Un-refurbished secondary quality space continues to face difficult conditions and higher vacancy.  Because of this, larger incentives for this type of stock are common.

Foreign Investors Increase Presence

There has been circa-$868 million of sales in the Brisbane CBD to date this year.  Based on the first half of the year, sales activity is on track to reach around the same level as last year’s total of $1.5 billion.

Foreign investors have been extremely active, as both vendors and purchasers, during the year to date. Foreign investors who have made acquisitions during 2018 to date include Firmus Capital, JP Morgan, Hines, Rockworth Partners and GIC.

The largest sale of 2018 to date has been 53 Albert Street, currently under contract for $250 million to JP Morgan from Challenger Life.

Narrowing of Yield Spread

Yields tightened further over the year to June 2018.  The spread between prime and secondary yields has narrowed during recent months. During the June quarter 2018, Premium-grade yields ranged between 5.00% and 6.00%; A-grade yields ranged between 5.50% and 6.50%; and B-grade yields ranged between 6.50% and 7.50%.

The Outlook is Positive

  • According to m3property Research, vacancy is forecast to decline to be circa-12.0% by the end of 2020.  This decline will be the result of the withdrawal of some stock (including the Transit Centre for the Brisbane Live project) and the continued strengthening in tenant demand.
  • There are some major tenant moves which will also contribute positively to net absorption and declining vacancy.  For example, WeWork is expected to absorb circa-11,000 square metres of space and Allianz will be relocating to circa-5,800 square metres of additional CBD space, both over the coming year.
  • The vacancy outlook has the potential to change considerably if other projects in the supply pipeline proceed to construction in the near future.
  • We expect growth in effective rents to accelerate over 2019 / 2020 – a result of both increasing face rents and declining incentives.  Over the next decade, prime rents are forecast to grow at a compound annual rate of 3.4%.
  • Investment demand is expected to remain strong over the near-term. Yields are now thought to have reached their bottom, where they are likely to stay over the remainder of 2018 and into 2019.