Positive signs in Brisbane office market as demand picks up

However, it appears the tide is turning, with demand picking up and vacancy rates slowly falling.

Mr Moon said confidence was increasing in the market, but it was still early days.

“Really it’s been the first time in over five years I’ve seen the type of positivity that we are seeing now,” Mr Moon said.

“It’s not a boom, but there’s some good signs there. There’s a supply gap until later 2019 – quarter three and quarter four 2019 is the next time we’ll see new buildings in the market.

“We’ve got a little while now to soak up some of the vacancy in the market.”

He said CBD office vacancy was sitting at about 16.2 per cent with B grade at about 22 per cent.

However, premium and A-grade assets had reduced to about 12 per cent and could tighten quickly.

With only about five premium-grade buildings in the city it could only take one or two deals for that market to fall below 10 per cent vacancy, Mr Moon said.

“Flight to quality is definitely a trend that’s evident and has been for a few years, because the deals are attractive and it’s allowing tenants to secure space in a better premises, a better building than they are in now, and even a better location,” he said.

“We are seeing tenants go from B to A grade, A to premium, plus tenants coming from the fringe into the city as well.”

The CBD office market is being impacted by more positive economic conditions, included increased interstate migration, he said.

CBRE associate director Ally McDade said Queensland’s housing affordability had again become one of its calling cards and the CBD office market was set to benefit.

The Brisbane office is tipped to start getting tighter over the next 12 months. Photo: Getty Images/iStockphoto

“Queensland has returned to its status as a preferred destination for Australians on the move, recently tipping a decade high to record the largest net interstate migration gain across the country,” she said.

“Over the past year alone, moves to Queensland were up 55 per cent to almost 20,000 people.

“Following an extended period of underperformance, total population growth in Queensland now sits above the national average at 1.7 per cent.”

And it is not just interstate migrants heading north, one of the new players in the CBD office leasing space are co-working operators, mainly from Sydney or Melbourne, Mr Moon said.

He said flexible workspace providers such as Christie Offices and Hub Australia had been active in the CBD office market after securing well-located assets that they fitted out creatively, including rooftop areas.

“They like to be central, good transport links and amenities for their customers,” Mr Moon said.

“They’re a decent size – generally 3000 square metres seems to be a tipping point. Three to five [thousand square metres] is the range for most of these guys so it’s quite a big chunk of space.

“They are backing themselves to fill it, which shows confidence in business in Brisbane.”

Mr Moon said with the CBD office market improving, now was the time for tenants to lock in good terms because the window for opportunity was closing.