Brisbane Fringe Q107.05.2012
How would you characterise your market at the moment?
Despite a slight rise in vacancy to 7.7% in, the Brisbane fringe office market continues to experience solid levels of tenant demand. After reaching a cyclical peak of 11.4% in early-2010, the vacancy rate has now fallen by 3.7%. The rapid tightening of vacancy has seen new rental growth as pressures emerge, particularly at the prime end of the market. Whilst the supply pipeline has remained subdued, new project commencements are beginning to emerge. However, these projects continue to remain largely pre-committed and are expected to have a minimal impact on the market when completed.
Are there any trends you are noticing among the tenants you are talking to?
Expansion space above and beyond actual core business numbers has become a hot topic within the mining and resource sectors. These groups have a corporate space requirement and specific project requirements which fluctuate over the required term landlords are seeking (minimum of eight years for new developments). Tenants are faced with the decision of taking more space to factor in project growth or being spread over several locations. The verdict isn’t out and we will be watching this space very closely.
What do you think will be the biggest influence on your market in Q2?
We are seeing some larger corporate occupiers beginning to initiate a cost rationalisation process as part of their business strategy. A large part of this process includes re-evaluation of their commercial real estate requirements and identification of more affordable occupant solutions. If this trend continues, we could see a shift in focus from traditional CBD tenants, who may look to fringe precincts for their requirements.
What will rents and incentives do in Q2?
We expect rental growth pressures to continue both in the prime and secondary markets. Our expectations are that the prime and secondary ends of the market could experience around 4% growth in gross face rents over 2012. This will be driven by strong levels of net absorption and limited supply pipeline. Incentive levels are expected to remain stable as new mooted developments continue to compete for pre-commitments.
What should landlords do to adapt to these market conditions?
Tenants are focused on space utilisation, efficiency and flexibility when committing to new accommodation. Landlords will need to work more closely with these requirements. The proactive and more knowledgeable landlords will be able to demonstrate bottom line savings through understanding how specific companies operate. Something to monitor will be Active Base Working (ABW) and its impact on future requirements.
Director, Office Leasing
Recent Leasing Deals
Market Balance, as at March 2012
Download a PDF of the Brisbane Fringe Q112 Market Overview