Transactional activity in the commercial investment markets is expected to pick up this year, and Brisbane’s office assets are likely to drive this trend.

Investors are looking at Brisbane for several reasons, including its stable vacancy rates with low future supply in relation to demand, and strong growth prospects with high migration and a strong infrastructure pipeline.

Brisbane’s office market has been one of the best performing around Australia, with recently released vacancy figures from the Property Council of Australia finding the city’s CBD office vacancy rate remained stable over the six months to January 2024, rising from 11.6% to just 11.7%. It now has one of the lowest CBD vacancy rates, with only Hobart and Canberra sitting lower.

Nationally, CBD vacancy rates increased from 12.8% to 13.5%, with non-CBD areas rising from 17.3% to 17.9%. However, in Brisbane, the fringe vacancy rate dropped from 14.9% to 13.9%.

Brisbane’s Fringe office market has the highest annual net absorption over any other office market in the country with over 45,000sq m, with Brisbane CBD at number three in the country with over 16,000sq m.

Knight Frank research predicts Brisbane’s CBD office market vacancy rate to dip to under 10% by the middle of this year before rising again due to new supply in 2025. It is then expected to fall below 10% again during 2026 and 2027.

With high construction costs and lack of builder availability continuing to be a barrier for new development, the supply of new office developments in Brisbane will be limited for the next few years. Meanwhile, tenant demand continues to broaden across industries. Both of these factors will put a halt on an increase in vacancy.

The strong leasing fundamentals in Brisbane’s office market are primarily driving investor interest in the city’s office assets, with solid occupancy and growing rents giving investors confidence in the market.

Effective rentals in the Brisbane CBD grew by 10% during 2023 as incentives slowly retract with face rents on the upward swing.

Knight Frank’s recently released Australian Horizon 2024 report predicted that a recovery will emerge for the commercial property market this year, and with greater confidence and clarity emerging for buyers and sellers 2024 will be a better year to acquire assets.

In line with this we believe the Brisbane office investment market will recover this year, and we will see greater activity.

While leasing fundamentals are one aspect attracting investors to Brisbane office assets, another factor putting Brisbane in the spotlight is Queensland’s population growth.

Net interstate migration in Queensland is the strongest in the country, with the latest ABS figures current to the end of June 2023 finding the Sunshine State added 32,255 people over the previous 12 months, well ahead of WA, which added 11,630 people. All other states and territories saw net outflows arising from interstate migration.

Queensland came in third for net overseas migration, adding 83,995 people.

As Queensland’s capital, Brisbane will benefit from this population growth, with greater demand for services and job growth which is set to continue the increased demand from occupiers.

Other factors drawing in investors are of course the 2032 Brisbane Olympics and a massive infrastructure pipeline of transport and entertainment projects that is continuing to the improve the city’s offering and desirable lifestyle.

By Blake Goddard, Knight Frank Director, Head of Investment Sales, Queensland

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Blake Goddard, Knight Frank Director, Head of Investment Sales, Queensland