Five projects to add 200,000sqm to Brisbane’s new office supply 

The largest project spanning 69,000sqm began construction in Q1.

According to a JLL report, although there were no new office completions in the Brisbane CBD for 1Q23, the Near City had two buildings reach practical completion: 152 Wharf Street, Spring Hill (24,000 sqm) and 31 Duncan Street, Fortitude Valley (20,374 sqm). Both developments had a blended pre-commitment rate of 80%.

“Five major projects are currently under construction in the CBD and the Near City market which will add approximately 200,000 sqm to the Brisbane office market. The largest of these projects is Waterfront Brisbane (69,000 sqm), which commenced construction over 1Q23. There are a further 22 projects with plans approved, which have the potential to add 645,000 sqm to the market,” the report added.

Here’s more from JLL:

The Brisbane CBD office market recorded positive net absorption of about 7,700 sqm, with the total vacancy rate marginally decreasing 0.3 percentage points (ppts) to 13.6%. The Near City office market recorded positive net absorption of about 42,800 sqm, with total vacancy decreasing 0.4 ppts to 16.8%. 

The main driver of growth in the Near City was the pre-commitment of the Australian Taxation Office (24,000 sqm) to 152 Wharf Street, Spring Hill, which reached practical completion in 1Q23. The drivers of tenant demand in Brisbane have been the overarching theme of flight-to-quality, assets with strong environmental credentials, and proximity to amenities.

Transactions stall in the quarter

Overall macroeconomic uncertainty has weighed on investment activity. One asset traded in the quarter in the Brisbane market: 70 Eagle Street, Brisbane, which was sold by Pembroke to Hancock Prospecting for AUD 110.0 million. 

CBD prime yields softened 25 bps on the lower end to range between 5.25%-6.75%. Secondary yields softened 25 bps on both ends to range between 6.25%-7.50%. Near City prime yields softened by 25 bps on the lower end to range between 5.50%-7.50%. Secondary yields softened 25 bps on both ends to range between 6.50%-8.25%.

Outlook: Macroeconomic uncertainty to impact leasing activity

Leasing demand is high with multiple active briefs in the market. Tenants are likely to continue seeking quality spaces for their workforce. However, weighing in on whether it is feasible to relocate or stay in light of an uncertain macroeconomic environment could result in some organisations taking their lease options to see what transpires over the short term.

Investors are expected to remain cautious as uncertainty around interest rates, inflation and the general cost of debt clouds the investment market. 

Note: Brisbane Office refers to Brisbane's CBD office market (all grades).