For several years, Jones Lang LaSalle has closely monitored the impact of the LNG sector on the Queensland economy and its effects on the Brisbane office market. Over the last 12 – 18 months we have witnessed a remarkable turnaround in Brisbane’s office market. The CBD and Fringe vacancy rates have declined by 3.6% and 3.7% since reaching a peak in 2010. The recovery of Brisbane’s office market has undoubtedly been impacted by the unprecedented level of investment in the Coal Seam Gas (CSG) to Liquefied Natural Gas (LNG) sector.
Since 2008, the four consortiums (led by Origin Energy, Santos, BG Group and Arrow Energy) driving Queensland’s emerging LNG sector have leased a combined 54,160 sqm of office space in the CBD and Fringe markets, plus they have active requirements in the market for a further 11,500 sqm. Prior to 2008, organisations in these four consortiums occupied around 16,800 sqm of Brisbane office space, so their combined expansion has already been around 37,360 sqm and will be close to 49,000 sqm when current leasing requirements are met.
While the direct impact on Brisbane’s office market from these companies has been significant, the flow-on effects have helped stimulate the expansion of several other companies into new space across the CBD and Fringe markets. Two companies, Bechtel and Worley Parsons, who have been awarded the engineering, procurement and construction contracts for the CSG to LNG operations, have expanded enormously over the last few years. While some of this expansion has not been entirely gas related, these two organisations have leased a combined 35,220 sqm and have active requirements for a further 3,850 sqm of space, the vast majority of which has been pure expansion.
In total, leasing activity of these six organisations directly exposed to the LNG sector has accounted for almost a quarter of all Brisbane office demand since the start of 2008. Nevertheless, the property industry needs to acknowledge the project nature of many of these requirements and the associated changes that this presents. Research undertaken by Jones Lang LaSalle to date points to a possible contraction in white collar employment by between one third and 50% as the construction phase winds down. In the short-term, we expect the LNG sector will continue to boost demand volumes in the Brisbane office market. However, landlords should continue to monitor this sector carefully if their assets are exposed to the LNG sector in order to protect the long term position of their assets.
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