The Brisbane CBD office market is in a period of uncertainty with supply levels up despite white collar employment levels and subsequent demand at long term lows. Total vacancy has yet again increased this period to 16.9% with sub lease vacancy becoming a growing concern now represented by 3.1%. For the strata market however vacancy levels have compressed, now just 9.0% however this market has witnessed at -3.8% decline in capital values to just $4,618/sqm.
Rents are responding to this increased vacancy and lack of demand particularly in the prime end of the market, resulting in some decline in effective rents as incentives have been reported up to 45%. However, despite these market fundamentals, investment demand in the freehold market remains. This is due to the broader weight of funds and appetite for both domestic and foreign investors for investment grade stock resulting in continued yield compression.
Looking ahead; continued completions will put further pressure on the occupancy levels particularly for premium and A grade stock. This will encourage movement downwards in net face rents and large incentives still on offer. For the strata market, the limited transactions highlight the lack of urgency to purchase particularly as leasing deals continue to be attractive.