Brisbane CBD office vacancies are expected to peak at more than 15 per cent this year
They will improve in 2023 but the level of sub-lease space being marketed remains a wildcard, according to the Knight Frank Brisbane CBD Office Market report, released this week.
Under the pressure of new supply and further negative net absorption, the report found, vacancies in the city’s office market will reach a 15.7 per cent peak in June.
Knight Frank Queensland partner and report author Jennelle Wilson said office vacancies were expected to remain elevated during next year.
“We will then begin to see material decreases during 2023,” Wilson said.
“In the medium term, vacancy is expected to remain above 12 per cent through to 2024-2025, which will continue to limit supply additions without substantial pre-commitment.”
The Knight Frank research found that leasing activity during the pandemic has been dominated by smaller tenants, with 85 per cent of leasing activity, excluding renewals, last year and into 2021 largely for tenants requiring less than 1000sq m.
Knight Frank head of office leasing Queensland Mark McCann said tenant activity was on the horizon with tenant engagement from larger users expected to increase from the middle of this year.
Tenants active in the CBD market and expected to make their next location decision announcements soon include CUA (6000sq m), KPMG (8000sq m), McCullough Robertson (4000sq m), APA Group (4000sq m) and the Federal Government (about 38,000sq m), according to the report.
McCann said the great unknown in future vacancy remained the level of sub-lease space being marketed.
“The actions of tenants during the next 12 months in this space—to either reoccupy or relinquish—has the potential to move the needle for the total vacancy rate,” he said.
The Knight Frank report found investment market activity is rebuilding after a slow 2020.
Last year turnover totalled $607.6 million, representing the lowest total transaction level since 2008 and 2009, following the GFC.
This year so far $210 million in deals have settled and $530 million is under contract, which the report notes, points to a strong year ahead.
Assets under contract include “the Gold Tower” at 10 Eagle Street, snapped up by local private syndicator Marquette Properties.
Wilson said offshore activity in the investment market during last year was limited to the settlement of the one major sale—66 Eagle Street.
This transaction comprised 63 per cent of the total transaction activity, with the remaining sales to domestic players.
“Despite few transactions and limited offshore active buyers, yields have remained firm for core assets, with the yield band widening to reflect assets with short-term vacancy exposure,” Wilson said.
Article Source: theurbandeveloper.com