Positive demand for Brisbane office space, with small tenants expanding

• Positive net absorption recorded in the Brisbane CBD, totalling 6,911 sqm. The small tenant cohort (<1,000 sqm) contributed most to positive demand. Navitas expanded within the CBD, taking 3,700 sqm. CBD headline vacancy reduced to 10.3%.
• Leasing activity in the Near City has resulted in positive net absorption of 18,620 sqm. Demand from small tenants continued and a state government department (5,750 sqm) has shifted into South Brisbane. Headline vacancy is now 11.4%.

No new office supply to be delivered in 2024

• There were no office completions in Brisbane CBD over the quarter. Three assets are currently under construction, with the first (205 North Quay) expected to complete in Q1 2025, the 44,312 sqm tower is fully pre-committed.
• Ongoing construction delays and rising costs for new developments are impacting the future supply of office projects in Brisbane. In the Near City, no major office projects are under construction.

CBD and Near City rent growth continues and incentives reduce

• CBD and Near City prime net effective rents (PNER) increased 3.4% and 5.8% over the quarter to average AUD 330 and AUD 223 per sqm per annum, respectively. Incentives in the CBD and Near City decreased by 1.1%.
• Prime CBD yields softened 25 bps on the upper end and 75 bps on the lower end to now range between 6.00% to 8.00%. Prime Near City yields softened 25 bps on the upper and 25 bps on the lower to now range between 6.50% to 8.25%.

Outlook: Vacancy to decrease, given the limited number of new offices under construction

• Office demand and occupier activity is likely to stabilise, following a year of elevated leasing activity, particularly from government departments. In the near term, tenant expansion from small occupiers will likely support demand into 2025.
• Capital markets have been impacted by elevated borrowing costs and yields have softened in H1 2024. Further clarity surrounding interest rates could allow for an increase in capital availability towards the commercial office market.