Property Council report: Brisbane CBD vacancy rises to 13.6 per cent

Office vacancy rate across the Brisbane CBD has edged higher and is forecast to increase further over the next year. LATEST FIGURES

Office vacancies have soared to their highest level in almost a quarter of a century as COVID-19 has slashed demand for space at the same time as a wave of new city towers is being completed.

The national office market vacancy rate increased from 9.6 per cent to 11.7 per cent — its highest level since January 1997 — in the six months to the end of January, according to the Property Council of Australia.

Landlords are scrambling to reposition their buildings to bring workers back to the city and expect that 2021 will see a pick-up in activity as corporate Australia gets staff back into offices.

In Brisbane the office vacancy rate edged higher over the past six months but experts said the CBD showed greater resilience than expected despite the impact of the coronavirus pandemic.

Director of the Property Council of Australia Chris Mountford. Picture: Attila Csaszar

The Property Council of Australia’s latest Office Market Report to January found the Brisbane CBD vacancy rate rose from 12.9 per cent in July last year to 13.6 per cent.

While there were expectations of a businesses leaving the CBD for the inner city, vacancy in fringe market increased from 14.3 per cent to 16.6 per cent over the same period.

Property Council Queensland executive director Chris Mountford said the office market fared “remarkably well” during the tumultuous time.

“Clearly the health restrictions and economic downturn caused by COVID-19 had a significant impact on commercial property in 2020, with many workers hesitant to return to their places of work,” he said.

“Despite talk of a flight from the CBD in response to COVID-19, non-CBD markets across the country also saw increases in vacancy, indicating that widespread health restrictions across all workplaces and the economic downturn caused by the pandemic were strong prevailing influences, rather than an aversion to CBD offices.”

The Brisbane CBD office vacancy rate is expected to blow out later this year with the completion of the Midtown Centre while an additional 45,266sq m due to come online in Brisbane fringe market.

An artist's impression of the Midtown Centre.

CBRE Brisbane & Queensland state director office leasing Chris Butters said the second half of last year, and particularly the final quarter, resulted in a “notable uptick” in transactions with the micro-sector (100sq m to 1500sq m) showing buoyancy.

He said that despite the improvement, CBRE Research suggests that both transaction volumes and the total quantum of net lettable area leased in 2020 was 66 per cent down on recorded 2019 levels.

Sub-lease vacancy levels increased throughout the final two quarters of the year volumes approaching the 50,000sq m mark. Accordingly, incentive levels have remained elevated at circa 40 per cent.

“The Brisbane office market outlook for 2021 remains challenging, albeit sentiment is forecasted to steadily improve on the back of the upcoming vaccine rollout,” Mr Butters said.

“Importantly, we anticipate a series of 5000sq m plus tenants will announce commitments in the first quarter of the year, which will create a level of occupier momentum that hasn’t been witnessed for 18 months.”