Brisbane, 6 April 2014- The latest Office MarketView from CBRE reports that Brisbane experienced an exceptionally strong year for investment, exceeding record levels set in 2007.
Total sales of $5 million plus were above the $3 billion mark for the year, with a record $2.5 billion in the CBD and a strong $787 million in the Near City/suburban market.
Quarter 4 was particularly strong, with sales volume totalling $1.1 billion. CBD assets selling in the quarter included a 50% share in 1 William Street for $396.7 million and 179 Turbot Street for $172.3 million. Major sales in the near city included 15 Green Square Close for $110 million and 154 Melbourne Street for $71.5 million.
Claire Cupitt, CBRE’s Associate Director of Research, said that demand from offshore and onshore funds seeking high yielding investments has supported a firming of prime yields, by 35 basis points in the CBD and 20 basis points in the Near City.
“With some investors now being priced out of prime stock, secondary assets are attracting higher levels of interest, despite high vacancy levels. As a result, there are also signs emerging of yield compression in secondary stock, although the yield spread to prime assets remains wide,” said Ms Cupitt.
Office Investment Activity, Brisbane
The office leasing market weakened considerable during 2013, largely a result of Queensland state government rationalisation and resource services firms downsizing.
CBD net absorption over the year was negative 98,800sqm, the worst result on record. Both direct and sublease vacancy has risen, with over 310,000sqm of vacant space identified (14.2%). The report states that over 90,000sqm of vacant space is sublease, including large tranches from Arrow Energy, Queensland Rail and Rio Tinto.
In the Near City, negative net absorption of 5,400sqm was recorded over the year. Vacancy is sitting at 12.7% as of January 2014, with the prime vs secondary asset split increasing.
“Prime vacancy is sitting at 11% in the CBD and 9.3% in the Near City, with secondary vacancy rates at 17.3% in the CBD and 16% in the Near City.”
Q4 saw a small number of major leases signed, these include; QBE Insurance and the Australian Government Solicitor occupying a combined three floors at 145 Ann Street in the CBD totalling 3,305sqm; and Flight Centre taking 1,700sqm at 108 Wickham Street, Fortitude Valley for two years.
Despite weak occupier demand and high vacancy, the pipeline is somewhat active. However, the next major building in the CBD will not be finished until 2016 (1 William Street), which should allow for some of the existing space to be leased.
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