- Only one new office project in pipeline for CBD, compared to three Fringe developments
- Rent and incentives remain steady across all CBD and Fringe markets
- Boost to QLD economy and employment figures set to raise Fringe face rents this year
Owing to the uncertainty surrounding Covid-19, the Brisbane office market has seen little injection to supply with developments completed in Brisbane’s CBD last year well below the 3-year average.
According to data from real estate services firm, Cushman & Wakefield, CBD office developments completed in 2021 failed to reach the 63,300 sqm 3-year average despite employment rates recovering swiftly.
While new supply within the Brisbane Fringe area is limited, newly completed projects in 2021 remained above the 3-year average of 34,000 sqm and a multitude of new projects are also in the works.
Office supply tight with few new projects
Supply within the Brisbane CBD office market is set to remain tight, with only one project currently under construction.
The office development at 80 Ann Street is scheduled for completion in early 2022, delivering 60,000 sqm to the market.
Although white collar employment levels declined by 1,150 in 2020, the office market recovered swiftly with a 4,000 personnel injection in 2021.
A further 2,500 employees are projected to enter Brisbane CBD offices this year, evidenced by a surge in enquiries and suggesting supply may need boosting to keep pace with demand.
In contrast, the Brisbane Fringe office market was recently delivered two new completions, the Jubilee Project in Fortitude Valley (18,200 sqm) and MOBO in South Brisbane (17,800 sqm).
Injections into the Fringe office market will continue in the near future, with 24,000 sqm at 152 Wharf Street to be delivered this year. Two further developments are expected to reach completion in May 2023, 895 Ann Street (22,200 sqm) and 31 Duncan
Street (19,700 sqm).
CBD rent and incentives remain stable
Little change to office rents in Brisbane’s CBD was recorded, with gross effective rents remaining stable in the Premium and A-grade office markets in 2021.
Gross effective rents averaged $540 sqm pa for Premium office spaces, while A-grade office spaces averaged $410 sqm pa.
Prime Gross Effective Rent, Overall Vacancy (6 Monthly)
B-grade office spaces currently have a gross effective rent of $340 sqm pa and the highest vacancy rate of 14.8%, compared to the Premium and A-grade office vacancy rates of 8.1% and 13.2% respectively.
Gross incentives also remained stable within the Premium and A-grade markets, averaging 37.5% and 41.5% respectively.
B-grade incentives now average at 45.0%, having increased marginally in Q2 2021.
Fringe face rents projected to grow in 2022
A-grade gross face rents within all Fringe markets remained stable within the second half of 2021, sitting just below the CBD gross face rent of $705 sqm pa.
Gross face rents were the highest in Fortitude Valley ($630 sqm pa) while South Brisbane ($620 sqm pa) and the Inner West ($525 sqm pa) trailed behind.
Gross effective rents displayed similar stability, averaging at $355 sqm pa in Fortitude Valley and South Brisbane and $270 sqm pa in the Inner West.
Gross incentives also indicated steady conditions, averaging 44% in Fortitude Valley, 43% in South Brisbane and 48% in the Inner West, all above the CBD at 42%.
As for what the future holds, the Queensland economy is set to grow in strength seeing Fringe employment figures rise.
As a result, upwards pressure will likely be placed on face rents causing growth in 2022.
