A "perfect storm" is on the horizon for Brisbane’s fringe office market
A “perfect storm” is on the horizon for Brisbane’s fringe office market as demand is finally starting to pick up at a time when very little new stock is coming on the market, experts say.
Such is the shortage that only a handful of locations are still available for businesses wanting to lease any substantial office space near the CBD.
“I’d say the main aspects of the market thus far this year is that we’re predicting a bottleneck in supply to start to form. At the moment there’s only really three pieces of stock that can accommodate users of 4000 square metres or greater,” CBRE office leasing director Mel Pikos said.
Of the three buildings, only one was currently available – 144 Montague Road, in South Brisbane – with two still undergoing or yet to start refurbishments, he said.
Mr Pikos said after a number of years of relatively poor market conditions, the fringe office leasing market was now on track to record strengthening rents and lower vacancies, due to the supply issues.
“It’s not one driving thing. It’s the combination of the perfect storm, all leading towards a really tight market, and I think there’s going to be some rent growth,” he said.
Demand was coming from a mixed bag of industries, including state and federal governments as well as IT, Mr Pikos said.
He said the market was likely to resemble “musical chairs” in the future, with businesses competing for a dwindling supply of stock.
“Most buildings take at least two to three years to get out of the ground and finished,” Mr Pikos said.
“I’m predicting that it’s going to hit a bit of wall, and then all of a sudden, like a game of musical chairs, the music’s going to stop, and there’s going to be no chairs left for these tenants to sit on.”
According to Deloitte Access Economics, white-collar employment is expected to increase by about 29,000 jobs in the Brisbane near-city area, compared with 19,000 jobs in the Brisbane CBD area, over the seven years to 2025.
Colliers International office leasing national director Bo Veivers said the trend revealed that the Brisbane fringe market would experience higher demand for office accommodation than the CBD area.
“We anticipate that the forecast higher demand will support a tightening in metro vacancy rates over the medium term, although this is dependent on the new supply entering the market,” Mr Veivers said.
“The inner-south office precinct remains as the tightest office market in the region with vacancy rates of 10 per cent for January 2019, with the forecast supply holding steady over the next 12 to 24 months as there are no new developments under construction.”
Mr Veivers said the urban renewal precinct of Bowen Hills, Newstead, Fortitude Valley, Teneriffe and New Farm was likely to attract the largest increase in supply over the next two years.
“This precinct is the fastest growing and preferred location for new developments with the stock nearly doubling in size over the past decade,” he said.
“The urban renewal precinct provides a well-located and affordable option for tenants compared to the CBD.”
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