When listed freight train and rail company Aurizon decided it would leave the Brisbane city centre for a new headquarters in Fortitude Valley, it kicked off one the larger developments in the suburban market in recent years.
And the move also underscores just why rents have held up in the suburbs better than the city.
That’s because Aurizon will take all 19,000 square metres for 12 years in the 15-level tower planned by Consolidated Properties using land held by the Anglican Church at 900 Ann Street.
The $170 million building is due for completion in 2018. Charter Hall funds will buy out the development on a yield of 6.5 per cent.
JLL’s head of Queensland leasing, Adam Barrett, handled the leasing negotiation, while JLL’s Seb Turnbull and Geoff McIntyre introduced Charter Hall as the buyer of the development.
So with the space fully committed, it won’t add to net supply. The suburban office market is already tighter – vacancy is at 12.5 per cent – compared to the CBD, where it is 14.9 per cent.
“In the metro market in Brisbane there is certainly a lack of good-quality commercial office sites, mainly because most of them were taken up in the residential cycle,” said Colliers agent Bo Veivers.
“The key areas are the Fortitude Valley and South Brisbane precincts that, from both a residential and office perspective, is where people want to be.
“The fringe market is a much stronger position than the CBD. Fortitude Valley and South Brisbane are still the tightest precincts. We’re in a much better position than what are CBD counterparts are”
Some of the bigger deals in the metro markets include the state government taking up 5000 sq m at 315 Brunswick Street in Fortitude Valley, Careers Australia taking 2000 sq m at 515 St Pauls Terrace and Energex taking 3000 sq m at 25 Monpelier Road in Bowen Hills.
According to TCN Worldwide Brisbane, suburbs such as Newstead, Fortitude Valley and West End, all on Brisbane’s city’s fringe can be a commercial landlord’s playground; when they know how to find the right tenant.
Chris McLeod said “rents in Brisbane’s city fringe and suburban markets are likely to rise in the next 12 months as supply remains constrained and that tenanting city-fringe commercial property is all about the right strategy”.
TCN Worldwide Brisbane covers markets in the northern suburbs from Fortitude Valley to Redcliffe and the southern suburbs from South Bank, West End and Woolloongabba to Coopers Plains.
“Rental values in Brisbane’s city fringe markets like Newstead, Fortitude Valley, West End and Woolloongabba were still being supported by the amount of space taken out in recent years by residential developments,” he said.
TCN Worldwide Brisbane recently struck nine leases in one building in Longland Street, Newstead, averaging between 80 sq m to 250 sq m, comprising 2000 sq m in total, on incentives of less than 10 per cent.
In contrast, larger spaces of more than 400 sq m in a nearby building were being let on 30 per cent incentives.
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