Brisbane’s ‘Near City’ office precinct is emerging one of the most sought after business hubs, with a surge in demand from tenants amid the region’s ongoing urban revitalisation.
CBRE’s Associate Director Mel Pikos said demand for office accommodation in the Near City precincts was rapidly strengthening, with strong interest from a broad sector of occupiers.
“With positive net take-up of 26,800sqm in the past 12 months, the Near City market continues to outpace demand in all other Queensland office markets,” Mr Pikos said.
“This has predominantly been driven by increasing interest from occupiers looking to acquire a presence in the urban renewal precincts of Fortitude Valley and Newstead – with these areas accounting for 21,700sqm of positive absorption.”
Mr Pikos said new supply in the Near City remained limited with K1 at 1 King Street (15,990sqm) - the first commercial tower within the Brisbane Showgrounds precinct - being the only tower completed in 2015.
“Further to this, a total of 32,515sqm of commercial office accommodation was withdrawn from the market over the course of the year,” Mr Pikos explained.
“Withdrawals have typically been dominated by older B and C-grade office buildings being demolished for residential redevelopment – which is further prompting incumbent office users to relocate and upgrade the quality of their accommodation.”
In 2016, the Near City market will see just one new addition to the commercial skyline - the 23,528sqm Southpoint development in South Bank.
The property’s office component has been fully pre-committed by Flight Centre, with the current CBD occupier relocating its global headquarters from the city to the building. The building is forecast for occupation in Q4, 2016.
Further evidencing the flight of tenants relocating from the CBD, Aurizon’s new corporation headquarters is currently under construction at 900 Ann Street in Fortitude Valley.
Aurizon has committed to the entire building, totalling 18,991sqm of commercial office space.
With the tower not due for completion in April 2018, no new commercial developments will be added to the Near City office precinct in 2017.
Mr Pikos said the Aurizon and Flight Centre commitments would positively impact the net absorption figures in the Near City, as well as provide a catalyst for feeder businesses to also relocate.
“These commitments provide a level of certainty to the development pipeline of buildings in these areas - particularly given they are both fully committed and not providing direct backfill options in the respective markets,” Mr Pikos explained.
With a further 30,000sqm of potential stock withdrawals in 2016 and an extremely limited development pipeline, Mr Pikos expects the market will begin to rapidly tighten through 2016 and 2017.
“Prime vacancy is expected to drop below 8% over this period, while there is also significant potential for a bottleneck to form due to a lack of forward supply,” Mr Pikos said.
“This would typically support a strengthening of rental growth, although competition from the CBD is likely to limit the scale of growth that will be witnessed.”
Mr Pikos went on to say the Near City continued to demonstrate a stronger underlying occupier market in comparison with the CBD.
“The Near City offers greater flexibility in terms of rents, floor plate sizes, campus opportunities, shorter construction periods, continual improvement in retail and transport amenity, and of course higher volumes of car parking numbers at more affordable rates,” Mr Pikos said.
“The lack of future supply will be an area of key concern for occupiers, unless significant pre-commitment to new projects can be achieved, with occupiers the catalyst for new development.”
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