The Property Council of Australia bears good news for Brisbane and Perth Office markets in their latest office market report.
Brisbane and Perth have all the features of twin cities – resource-dependent economies, a reasonable price tag on commercial property investments (compared to their wealthier cousins, Sydney and Melbourne) and now “twinning” office markets.
The two cities’ CBD office markets are both seeing continued recovery according to new data from the Property Council of Australia. Vacancy is dipping in Perth and demand headed upwards for high-quality assets in Brisbane. Here’s a quick summary of the latest PCA office market report.
Brisbane office demand rises for high-quality space
The appetite for office space in Brisbane has increased from resource-industry employers, co-working space operators, and as a result of a flight to quality.
The prime sector continues to be the darling of Brisbane’s office market. A-grade vacancy is expected to continue to tighten for the foreseeable future and rental growth is predicted to continue.
New supply in Brisbane outweighs demand
As a result of new supply in the market, Brisbane’s office vacancy rate has not improved.
The CBD vacancy rate rose from 11.9 per cent in July to 12.7 per cent over the six months to January.
The bump in vacancies is not a reflection of demand, as the Brisbane office market sees more tenants vying for high-quality space. High incentives and favourable tenant terms are still plaguing some commercial property landlords in the secondary sector, but this is expected to improve as more investment flows into the resources industry.
Perth CBD Office recovery continues
The latest data from the Property Council of Australia shows some real positivity for Perth. The PCA office figures show a small but significant tightening in the overall vacancy rate, easing to 17.6 per cent from 18.5 per cent over the six months to January.
Perth supply constrains
The drop in vacancy rates has even taken place alongside some new supply over the last six months, showing the market’s potential return to strength.
The coming years will look different, however, with supply in WA constrained over the next three years. Perth is set to have the smallest future supply pipeline of any capital city. Less than 200,000sqm of new office space will be added to Perth’s office market between now and 2022.
Our view is that an office building with shorter term lease expirations might be well placed to capture some leasing demand upside.
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