Brisbane, 29 October 2013 –While the stock of office sublease space in the Brisbane CBD has surged this year, expectations are that the market has peaked amid signs of increasing business confidence.
CBRE’s latest Brisbane Sublease Barometer shows that CBD sublease space has increased by over 130% since the start of the year to reach 79,000sqm in September, up 4,084sqm on the previous month.
A total of 51 sublease opportunities were identified across 85 full or part floors through the Barometer, which tracks both the volume of sublease space and the trends occurring within different industry groups and market sectors in Melbourne.
However, CBRE State Director, Office Services, John Walklate said no significant new stock was expected to come to the market and head lessees were increasingly looking to take space back off the market as business sentiment improved.
“Commsec’s recent “State of the States” report, highlighted that Queensland’s economy grew by 4.3 per cent over the past year, which was the second fastest growth rate in the country,” Mr Walklate said.
“With the state unemployment rate falling, retail spending on the rise and business confidence increasing, the expectation is for a gradual improvement in leasing conditions in both the direct and sublease market.”
CBRE’s Sublease Barometer shows that the resources sector presently accounts for the greatest amount of sublease space in the Brisbane CBD – 34,408sqm in total – as a result of companies such as Rio Tinto and Arrow Energy reducing their space and office closures by companies such as Newcrest Mining and Xstrata Coal, save for very small presence being maintained.
A further 21,407sqm of space was sourced from the public sector across several larger holdings. This has been a result of Queensland State Government job cuts and consolidation with almost 2,500 full-time equivalent jobs in inner Brisbane cut from the Queensland public service in 2013.
“This process has contributed to the rise in sublease space, although it has had a more pronounced impact on direct vacancy, resulting in space being vacated in non-government owned buildings as leases expire,” Mr Walklate said.
Overall, CBRE’s Barometer shows that contraction accounted for an estimated 82% of the sublease space on the market. Companies ceasing operations accounted for a further 6% while consolidation (5%) and amalgamation (4%) were the other drivers.
The Barometer also highlights that the largest share (20%) of the sublease opportunities where a lease expiry could be identified showed an expiry in 2015. A further 8% were identified with a lease expiry in 2014.
“We expect that a number of these will convert to direct vacancy due to their potential time on the market or, alternatively, they will be reabsorbed by the lessee if business conditions show sufficient improvement,” Mr Walklate said.
He also noted that the sublease trend was presenting opportunities for some groups seeking larger tenancies for relatively short time periods.
“This has been highlighted by Origin Energy taking 5,376sqm of sublease space at Waterfront Place and the Department of Prime Minister and Cabinet tenanting 3,655sqm in AM60 as the G20 summit headquarters, both on terms of less than two years,” Mr Walklate said.
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