A rise in office vacancy in the Brisbane CBD has been attributed to a market in transition, with reductions in tenant demand expected to be corrected in 2018.

The Property Council of Australia’s latest Office Market Report, released today, shows that vacancy across the CBD has increased over the last six months from 15.7 to 16.2 per cent.

“Contractions in tenant demand for lower-grade stock across the CBD have contributed to this vacancy increase,” Queensland Executive Director of the Property Council, Chris Mountford, said.

“Higher grade office space recorded positive tenant demand over the last six months, with a distinct flight-to-quality being observed in the data.

“While Brisbane CBD vacancy is currently high, there are plenty of tenant EOIs in the market, so there are positive signs over the horizon.

“Suncorp is currently seeking between 30,000-40,000sqm of space, the ATO is seeking 24,000sqm, and QSuper is after a further 15,000sqm.

“With 47,700sqm of space due to come online in 2019, and several office building proposals being mooted, 2018 will be a critical year for new tenant demand growth.”

The Property Council has raised concerns with the State Government’s proposed increase to Land Tax rates.

“At a time when office vacancy is remarkably high, it is an extremely risky move for the State Government to significantly increase land tax for building owners,” Mr Mountford said.

“The 25 per cent increase to land tax levels, currently being proposed by the Government, will significantly add to the cost of doing business in Queensland.

“This disincentive to invest in Queensland property would be a very unwelcome development at a time when the market needs stability and further growth.”

While vacancy levels rose slightly in the Brisbane CBD over the last six months, the Brisbane Fringe market experienced a withdrawal-driven drop in vacancy from 14.6 to 14.1 per cent.

“It is clear that many building owners in the Brisbane Fringe are using the opportunity to refresh their assets,” Mr Mountford said.

The Gold Coast office market recorded a decrease in vacancy over the six months to January 2018, falling from 11.3 per cent to 10.6 per cent.

Vacancy in the Sunshine Coast increased in the 12 months to January 2018, following the completion of significant new office developments in 2017. The office vacancy rate on the Sunshine Coast rose from 6.9 per cent to 15 per cent despite strong tenant demand figures.

Headline comments:

  • Brisbane CBD vacancy increased in the six months to January 2018
  • This was due to negative demand
  • The upper grades of space recorded positive demand
  • Negative demand was concentrated in the B Grade segment
  • No space in due to come online until 2019

Vacancy analysis:

  • Brisbane CBD’s vacancy rate increased from 15.7 per cent to 16.2 per cent
  • This was due to -31,364sqm of net absorption
  • 42,642sqm of space was withdrawn over the period while 18,303sqm was added
  • The upper grades of space recorded positive demand
  • Negative demand was concentrated in the B Grade segment

Future supply:

  • No space in the pipeline for 2018
  • 47,700sqm of space is planned for 2019

 

property chart