Brisbane is experiencing a shortage of prime office space.

 

Recentralization and a flight to quality, according to CBRE, are assisting in the growth of Brisbane's prime CBD office sector, which is bolstered by record levels of investment in new construction projects. property qatar

The Queensland Government's Cross River Rail project, which will include a new underground station at Albert Street; Shayher Group's commercial tower development at 300 George Street; and the $3 billion Queen's Wharf casino are all expected to redefine the CBD's traditional boundaries and turn George Street into a new entertainment precinct, according to CBRE.

A unprecedented $15 billion has been allocated to the CBD of the $35 billion worth of major projects currently underway or planned for Brisbane.

"This is game changing," Chris Butters, CBRE's Queensland state director, said. The Brisbane CBD has never seen such a high degree of investment, with many projects in the works at the same time."

"As occupiers pursue enabled locations offering facilities for workers, security, and quality public transportation," Mr. Butters said, "this influx of major projects is expected to exacerbate the current themes of recentralization and a flight to quality, which are at their highest levels since the resource boom seven years ago."

The positive net absorption of 21,739sqm in the six months to July 2018, 90 percent of which occurred in the prime grade market, exemplified the flight to quality.

Furthermore, prime grade space has accounted for over 80% of the 150,000sqm in leasing transactions completed so far this year, including Suncorp's pre-commitment to a new 39,700sqm headquarters at 80 Ann Street, the Department of Veteran Affairs lease at 480 Queen Street, Westpac's commitment to GPT's Riverside Centre on Eagle Street, and WeWork's lease at 192 Ann Street - all of which have fueled the expansion.

This has had a significant effect on vacancy rates, with CBRE predicting a prime grade vacancy rate of 9.5 percent by the end of the year, the lowest in a decade.

Improved market conditions are also assisting the city's recovery, with CBRE predicting white-collar job growth of 1.9 percent this year, the highest amount since 2014. In addition, CBRE expects the average annual white-collar job growth rate to nearly double, from 0.7 percent in the previous five years to 1.2 percent in the next.

Mr. Butters said that as vacancy in the prime office market tightens, the supply of contiguous space options is becoming increasingly restricted. According to the CBRE leasing guide, there was less than 3,000sqm of contiguous premium space available in October.

Despite growing demand and low vacancy rates, the supply pipeline for the future remains strikingly small.

The Annex, a 7,200sqm boutique workspace at 12 Creek Street, Shayher Group's commercial tower at 300 George Street, and Suncorp's head office at 80 Ann Street HQ are the only projects currently under construction. The total NLA of these projects is about 100,000sqm.

In contrast, in the previous five years, twice as much room was created, despite a backdrop of record-high vacancy and record-low employment growth.

"As metro markets tighten and tenants of all grades compete for prime opportunities," Mr. Butters said, "tenant advisors are becoming increasingly wary of the changing conditions."

Several tenants have recently been unable to obtain their desired positions and room sizes, resulting in less-than-ideal results, such as non-contiguous space and secondary locations."

Mr. Butters indicated that occupiers should revisit lease strategies three to four years before they expire in order to ensure the best spot.

"In a tightening prime sector, the lack of early consideration of accommodation policy will become troublesome for tenants with pending expiries," Mr. Butters said.

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