Employment growth to boost Brisbane CBD office market

Employment growth to boost Brisbane CBD office market

Global property consultancy Knight Frank is optimistic about the future of Brisbane's CBD office market.

The outlook is positive according to the consultancy's latest CBD Office Market Overview report, with the Brisbane CBD office market to benefit from continued growth in Queensland's economy.

Knight Frank says that forecast employment growth is expected to be a standout in 2019 with the Brisbane region to record 25,000-plus more jobs in the core office-based industries.

In the five years to come there will be 10,500 office-based jobs added per annum in the river city.

The group's research also found that tenant demand in the Brisbane CBD office market had remained steady with net absorption positive and vacancy decreasing to 11.9 per cent, the lowest in seven years, and down from 14.6 per cent a year ago.

The finance and insurance industry accounted for 26 per cent tenant activity over 2018 and 2019 due to the Suncorp pre-commitment to 80 Ann Street, followed by government and public administration at 22 per cent, and resources and energy at 10 per cent.

Joint head of office leasing Mark McCann says the largest recent office space commitment in 2019 remains the decision by Rio Tinto to take approximately 20,000sqm in the Midtown Centre development.

"Co-working and serviced office tenants are also contributing directly to net absorption, accounting for six per cent of total leasing activity in 2018 and 2019, with WeWork continuing to expand its Brisbane CBD footprint," says McCann.

"While there are currently no super-tenants seeking space in the CBD, there are requirements in the market, including Sunsuper for up to 16,000sqm, McCullough Robertson with up to 6,000sqm and the State Government's potential requirement for more than 25,000sqm."

The Knight Frank report also found investment volumes in the Brisbane CBD office market are high, sitting at $2.86 billion over the year to September, roughly $1 billion higher than the corresponding period one year earlier.

The balance between domestic and offshore buyers has flipped in the 2019 calendar, with offshore purchasing only representing 17 per cent of transactions compared with 73 per cent in 2018.

However, Knight Frank partner and Head of Queensland Ben McGrath says these figures do not tell the truth on their face value.

"Many major domestic investors purchasing in the Brisbane CBD office market have direct mandates to invest offshore capital to complete transactions," says McGrath.

"However, the fall in offshore investment that we have seen is partly attributable to uncertainty surrounding the two per cent land tax foreign surcharge. Several major acquisitions in Brisbane's CBD have been terminated or delayed due to the changes, which would see the surcharge apply to corporates and trustees."

"We are hopeful the changes will not be effected quite as planned, with industry bodies negotiating with the Queensland Government to reduce the scope of the impost."

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