Brisbane’s CBD office market had the strongest prime rental growth of the Eastern Seaboard cities over Q2, according to the latest research from Knight Frank. 

The city’s net face prime office rents rose by 3.6% over the three months to the end of June. Melbourne’s  CBD office market saw the second highest quarterly growth at 2.3%, followed by Sydney’s CBD at 2.1%. 

The strong growth for Brisbane over the quarter saw the city’s annual prime rental growth rise to a rapid  8.1%, followed by Sydney at 4.6% and Melbourne at 2.4%. 

Knight Frank’s research found the annual growth in the Brisbane CBD office market’s prime rents was the fastest since 2008. On an effective basis, growth has been even stronger, with declining incentives  resulting in effective growth of 15.1% year-on-year. 

The pace of rental growth for secondary assets has been slower but still solid at 3.8% year-on-year. 

Knight Frank Chief Economist Ben Burston said: “Strong prime rental growth in the Eastern Seaboard CBD office markets over Q2 demonstrates that occupier demand for quality office space  remains resilient. 

“While the economy has been sluggish and vacancy rates are elevated, businesses continue to seek  out higher-grade options that will appeal to staff and that align with wider corporate objectives  including more stringent ESG requirements. 

“Multiple pressures are driving a rapid escalation in Brisbane rents, with the market responding to  growing demand, high construction costs and limited availability of premium and upper A grade  floorspace. Despite recent growth, Brisbane rents remain well below previous peaks and growth looks  to have further to run. 

“Sydney rents saw solid growth over Q2. Among the precincts, the core CBD and Midtown performed  best, while performance has lagged in the Western Corridor and Southern CBD. 

“Melbourne rents returned to growth in Q2, however the market continues to see performance diverge,  with recent growth centred on the Eastern core precinct where rents are up 4.6% year-on-year, while  rents have been flat elsewhere.  

“On an effective basis, however, Melbourne rents have fallen by 6.3% over the past year due to rising  incentives, apart from in the Eastern Core where they have been stable.” 

Knight Frank National Head of Leasing Andrea Roberts said the 2023-24 financial year had seen  solid demand for office space in amenity-rich assets that were well located, in proximity to key public  transport modes.  

“While flexible working is here to stay, this has not hampered demand in the three key Eastern  Seaboard CBD cores in Australia,” she said. 

“Occupiers recognise the need to provide workplaces that support high productivity, wellness,  technology, collaboration and lifestyle. 

“Brisbane has certainly seen strong demand in FY 24 and we expect Melbourne and Sydney to  continue to experience solid demand in FY 25. This will come off the back of ongoing occupier interest  for the best office product, at the same time as we are seeing limited new development. 

“This scarcity of new office buildings will continue for remainder of the decade due to higher construction and financing costs, and will create improved deal metrics for landlords in the coming  years. 

“In Sydney, we anticipate the much-awaited opening of the Sydney Metro in August to be a game changer for ease and accessibility of travel between key office markets in the City Fringe and Lower  North Shore, which will support demand in these markets as the core stock is absorbed.”

For the full city reports linked below:

Q2 2024 Brisbane Report,

Q2 2024 Sydney Report,

Q2 2024 Melbourne Report