The Brisbane CBD Office market sentiment continues to show uncertainty, with new jobs growth creation slow, and take up in office space negative for the first six months of 2017; all resulting in the total vacancy rate increasing to 15.7% (July 2017).
These market conditions have translated into the fifth consecutive period of compression in capital values for the strata market, despite some turnaround in investment activity. While owner occupiers do feature in this market, private investors who are now more comfortable moving up the risk curve after this price correction have fuelled this investment activity. The flight to quality continues with vacancies falling across the prime markets and also translating into positive face rental movement over the last twelve months, despite high incentives remaining commonplace. This movement in face rents has also been witnessed in the secondary market despite vacancy increases.
The freehold investment market has been active due to the strong weight of funds domestically looking to invest. Yield compression continues to occur with prime yields now averaging 6.40% while secondary has now hit sub 8.00%.