The 'near city' office precinct, according to CBRE, is shaping up as Brisbane's most sought after business hub.
Associate director Mel Pikos says Fortitude Valley and Newstead have been major beneficiaries of this transition.
"With positive net take-up of 26,800sqm in the past 12 months, the near city market continues to outpace demand in all other Queensland office markets," says Pikos.
"This has predominantly been driven by increasing interest from occupiers looking to acquire a presence in the urban renewal precincts of Fortitude Valley and Newstead - with these areas accounting for 21,700sqm of positive absorption."
Pikos says it also comes down to new supply being limited, with K1 at King Street being the only commercial tower in the area completed in 2015.
"Further to this, a total of 32,515sqm of commercial office accommodation was withdrawn from the market over the course of the year," says Pikos.
"Withdrawals have typically been dominated by older B and C-grade office buildings being demolished for residential redevelopment - which is further prompting incumbent office users to relocate and upgrade the quality of their accommodation."
Aurizon (ASX: AZJ) and Flight Centre (ASX: FLT) are both relocating their headquarters from the city to its fringes, respectively moving to Fortitude Valley and South Bank.
Pikos says after these two towers, no new commercial developments will be added to the near city office precinct in 2017, but expects the presence of two of Brisbane's biggest public companies to act as a catalyst for others to relocate.
With a further 30,000sqm of potential stock withdrawals in 2016 and an extremely limited development pipeline, Pikos says the market will begin to rapidly tighten through 2016 and 2017.
"Prime vacancy is expected to drop below 8% over this period, while there is also significant potential for a bottleneck to form due to a lack of forward supply," she says.
"This would typically support a strengthening of rental growth, although competition from the CBD is likely to limit the scale of growth that will be witnessed.
"The lack of future supply will be an area of key concern for occupiers, unless significant pre-commitment to new projects can be achieved, with occupiers the catalyst for new development."
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