Brisbane’s Near City office market has experienced a surge in buyer activity in the year’s first half, despite a reduction in tenant demand in the year’s second quarter.
According to Knight Frank’s Brisbane Near City Office Market Overview report, more than $600 million in transactions (worth more than $3 million) were recorded for the Near City market in 2011-12.
The increase in sales turnover was anchored by the $186 million sale of the HQ North building in Fortitude Valley in November 2011.
In 2012 the largest transactions have been the $88.5 million purchase of 144 Montague Rd, South Brisbane and the $66.5 million purchase of 100 Brookes St, Fortitude Valley. Both buildings were bought by Hines Global REIT.
Yields have remained relatively steady, with only modest tightening in the prime upper range in the year’s first half. The current prime yield range is 7.75 - 8.55 percent. Secondary yields have remained stable at 8.75 - 9.5 percent.
Knight Frank says the pipeline of new construction in the market is beginning to build again, boosted by a mix of pre-commitments and the expectation of tenant demand.
New stock completed for the year to date include the ABC headquarters building at South Brisbane (4000 sqm) and a refurbishment of 15 James St, Newstead (2619 sqm) – both were fully pre-committed.
With the completion of 825 Ann St now deferred, no additional stock is expected for the Near City market in 2012. However, construction has begun on a range of other developments, with four more projects now at site works or the early construction phase due for completion in 2013 and 2014.
Knight Frank says expected completions for 2013 are 69 percent pre-committed.
Near City market rental levels grew in the year to July 2012, but softened in the year’s second quarter.
Gross prime effective rents grew by 14.4 percent to $403 a sqm, down from $420 a sqm posted in April 2012. Face rents remain unchanged at $500 a sqm (gross), but the average incentive has increased to 19.5 percent from 16 percent in April.
Secondary rents have stabilised at $344 a sqm (gross effective).
View the Knight Frank report