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Brisbane’s Metro office market is most improved in Australia

Categories: Commercial, Investments, Office

Dropping vacancy rates and increased demand has labelled Brisbane Australia’s most improved metro office market so far in 2019.

The Brisbane Metro office market is climbing the ranks. The recovering market has been labelled Australia’s most improved metro office market by Colliers International, thanks to increased tenant and investor demand so far in 2019.

Those holding office property in Brisbane Metro will be rewarded for their hold strategies; those looking for assets in the area will want to snap up the few opportunities available.

Brisbane metro office demand highest in eight years

Colliers’ latest Metro Office report states that vacancy in the sector has tightened nearly 2 percent, from 15.7 per cent in January to 13.8 per cent in July this year. Net demand hit 32,630 sqm in the first half of 2019, an eight-year high for Brisbane Metro office market.

Milton, a longstanding key office precinct in Brisbane’s fringe, has seen a record net absorption of 19,848 sqm so far this year, driving the vacancy rate down to 17.5 per cent. This is after a historical high level of 27.9 per cent in July 2018. It’s not the first time Milton has been best on ground for Brisbane’s metro office market.

Urban Renewal and Spring Hill precincts have also supported Brisbane’s metro office market’s decline in vacancy over the last six months.

Average net face rents are sitting between $430 per sqm and $481 per sqm for A grade assets in the Brisbane metro office market.

The larger floor plates in A grade assets are a major reason for the influx of relocating tenants. However, the limited supply of such premises is making it tricky for potential occupants to find these relocation opportunities. Investors are having the same problem finding investment opportunities in Brisbane’s office market.

Limited investment opportunities for growing investor base

Landlords are holding tight to A grade office assets in Brisbane’s metro precincts. With a low interest rate environment and an inverted Australian bond yield curve for short-term maturities, why wouldn’t they?

The lack of investment (and reinvestment) opportunities for these A grade properties has caused the weight of sales volumes to drop. The average sale price declined from around $60 million in 2018 to approx. $29 million over the year-to-date.

It’s expected that investment opportunities will stay tightly held for the rest of 2019 and well into 2020. This could give property values a serious boost.

Yields for B to A grade assets are already below historical levels, evidencing the lack of attractive investment opportunities. As of this writing, average yields for A grade assets sit between 6.20 per cent and 6.95 per cent.

Who’s looking for investment opportunities in Brisbane office?

High Net Worth investors, listed and unlisted property funds, and syndicators make up the largest portion of those seeking investment opportunities in Brisbane’s metro office market. Syndicates and private investors have more than doubled their acquisitions over the year to date, reaching $129 million compared to $66 million of sales recorded in 2018.

And for the third year running, institutional investors have transacted on the largest portion of office property in Brisbane metro, purchasing almost $250 million of the approx. $410 million worth of assets sold so far this year. Colliers cites yields and the market’s future potential as the core reasons for institutional investment appetite.

The little opportunity for investment, and the large competition for those wanting to partake, will continue boosting demand for A grade assets in Brisbane’s metro office market. Those with deep networks and eyes on unlisted assets are likely to be the lucky few who will take full advantage of this recovering sector.

For more information on investment in Australian office property, get in touch with Properties & Pathways today.