The Brisbane CBD and Fringe markets have remained relatively static over the last six months. Despite some supply and demand changes the overall performance of the market by way of vacancy has seen limited movement. Across the Brisbane Fringe market the total vacancy has reduced from 12.6% (July 2015) to 12.5% off the back of strong withdrawals of space during a time of negative absorption recorded at -4,405 sqm during the six months to January 2016. Looking more locally, the Toowong market has witnessed the greatest decline in occupied stock since July 2012, recorded at -2,889 sqm, and for the first time in nine years the size of the market has changed due to 3,400sqm being withdrawn. As a result the vacancy situation has fallen to 10.2% however over the past two years this result has been reasonably steady. Milton however has continued its three year period of negative absorption raising vacancies to its highest level on record at 20.1%. Spring Hill has been one of the better Fringe performers reducing its vacancy position to 13.0% after peaking at 20.7% back in January 2014, showing healthy take up of 3,041sqm during the second half of 2015.
The Brisbane Fringe market indicators have shown overall limited change, and as a result the rental position of the market has also seen limited movement. While overall vacancies have remained stable the position of the prime market remains superior resulting in some uplift in face rents however incentives remain at a high level keeping the effective position constant at $358/sqm. Secondary however has kept face rates steady while increases to incentives have dampened the average effective rental rate. Secondary gross face rents currently average $415/sqm with incentives in the 30% to 35% range bringing down the effective rate to closer to $270/sqm. For the strata market however, given the strong owner occupation, those smaller tenancies which do enter the market attract a lower incentive level or around 10% to 15% on a three year lease and generally taken as rental abatement.
During a time where demand for quality investment grade stock is strong across the whole of the East Coast, there has been limited change to the yield position within the Brisbane Fringe market. Sydney and Melbourne has been the main beneficiary of high demand led by overseas investors and low interest rates with record lows achieved across the office, retail and industrial markets. Brisbane yields have lagged these results given the somewhat poorer economic position of the state however in more recent times the CBD market has witnessed improved results. The prime fringe market is starting to show shoots of improvement in terms of yield with some minor declines occurring yet still within a broad range between 7.00% and 9.50% and still well ahead of the historical lows. The Secondary market however will take far longer to recover until the fundamentals of the market being reduced vacancies and improving rental position filter through the market.