- Falling vacancy and rental growth is strengthening Brisbane's CBD office market.
- Brisbane CBD office market no longer relying on SME's for deal volume.
- Rent is expected to grow for the rest of 2023 before slowing in 2024.
Brisbane’s CBD rental market is still going strong due to a combination of falling vacancy rates, strong rental growth and high net absorption, according to Knight Frank‘s Brisbane CBD Office Market Report October 2023.
Brisbane’s CBD vacancy rate decrease
The report noted that the total vacancy decreased from 12.9% in January to 11.6% in July, with sustained strong net absorption and no new supply over the first half of the year.
Brisbane CBD Vacancy
Furthermore, with no new supply expected until late 2024, the vacancy rate is expected to dip even further.
Queensland Knight Frank partner, Jenelle Wilson, said, “We expect the vacancy rate to dip to 8.9% by July 2024 before increasing again due to new supply from late 2024 in 2025.
“The expected lack of new supply during 2026 and 2027 will assist the vacancy to fall below 10% again and mid-term it will stabilise between 8.7% and 9.5%.”
Top and mid tier firms locking in future premises
According to the report, an ever increasing number of top to mid professional firms are locking in future premise decisions and striking while the iron is hot in regards to the range of choices on offer.
Moreover, the report notes that throughout 2023, 30% of leasing activity by areas were in tenancies at or above 10,000sqm, and a further 27% came from tenancies in the 5,000 to 10,000sqm range, representing interest from tenants of scale and larger pre-commitment activity.
Queensland Knight Frank head of office leasing, Mark McCann, said tenant demand was on the upswing in Brisbane’s CBD office market, with the market no longer relying on small-to-medium enterprises sector for deal volume.
“Leasing activity is now driven by the larger corporates and government requirements,” he said.
McCann added that after dominating market activity since 2019, smaller tenant activity may have peaked in the first half of 2023.
Knight Frank research recorded quite the sharp drop in the proportion of leases to small-to-medium enterprises, falling to below 10% this year, from 20% during 2020 to 2022.
“While still an active portion of the market, the cost pressures of small business may be beginning to impact on the courage of these small-to-medium enterprises to commit to new leases,” he said.
“This is in complete contrast to larger businesses, where market-leading accommodation and appropriate green ratings are seen as essential parts of employee value proposition and retention.”
Premium rents driving prime rental growth
The report revealed that on an annual basis, premium face rental growth of 8.2% is still outpacing A grade at 6.4%.
As leasing activity increases in the full and multi-floor A grade sector, rents have gone higher as tenants are willing to pay for a more premium experience.
Brisbane cbd rents
However, the report points out that in the future, the limited availability of multi-floor space will compete with an increasing mandate from corporates to contain costs.