Brisbane’s office markets have been hit hard by falling demand, rising vacancy and declining rents. But initial readings suggest that Q3 is shaping up to be a stronger quarter for leasing activity. Is demand finally stabilising?
Between 2007 and 2012 the Brisbane office market was thriving off the back of the mining boom. Over this period around 426,000 sqm of space was absorbed by the combined Brisbane CBD and Near City[1] office markets. However, as commodity markets weakened and the pace of investment in the mining sector slowed, close to 155,000 sqm of space has been handed back across the two markets since October 2012.
Cost saving measures by the newly elected LNP state government in 2012, including significant job cuts, were partially responsible for approximately 46,000 sqm being released to the market by state government departments between 2012 and 2015. But now, after almost three years of consistent consolidations, demand might be turning a corner. The CBD has now recorded two quarters of positive net absorption and several large leasing deals completed this quarter suggest this could be the first quarter of positive net absorption for the combined CBD and Near City markets since 1Q12. It is still too soon to say demand is now on a sustained rise, but there are several positive signs for improved future demand across the Brisbane office markets.
The recent election of a Labour state government, which has historically been associated with expanding public sector employment, should mean public sector job cuts by the state government are effectively over. The loss of mining-related jobs within inner Brisbane also seems to be slowing with mining and agriculture white‑collar employment forecasted to grow by 21% over the next five years[2].
While mining will remain important to the Brisbane office market we may be about to witness a broader based recovery driven by professional services, education and construction, as well as secondary jobs from tourism growth.
Brisbane is currently undergoing a cycle of re-generation with some of its largest ever projects currently planned or underway*. With every $1 million invested in construction estimated to result in $3 million created for the domestic economy, the sheer volume of major construction projects and upgrades should generate thousands of jobs for Queensland[3].
It should be noted that while demand may have turned a corner, Brisbane’s office supply pipeline remains strong and it may be some time before any improvement in demand translates to falling vacancy and substantial rental growth.
* Major projects planned or underway in Brisbane
Queens Wharf Redevelopment Howard Smith Wharves Redevelopment 300 George Street Development Edward & Albert Street Rejuvenation City Reach Boardwalk Northshore Hamilton Gasworks Precinct Development Boggo Road Development Yerongpilly Green Development Brisbane Airport Hotels and Conference Centre Brisbane Airport Second Runway Brisbane Airport Auto Mall Eagle Farm Track Redevelopment West Village, West End Brisbane Sky Tower 30 Albert Street
[1] Near City includes Milton, Toowong, South Brisbane, Fortitude Valley and Spring Hill
[2] Deloitte Access Economics
[3] ABS cited by the Property Observer “Why residential construction is so important to the Australian Economy”
More on 'Office' in 'Australia'
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- All play in Melbourne CBDApril 2, 2024
- Brisbane’s construction “dilemma”December 12, 2023
- Sydney CBD office: flood of supply, then droughtOctober 31, 2023
