Brisbane's office market has shown its mettle and is forecast to generate 16.5 per cent growth in the coming years.
The purported recovery of Brisbane's commercial market has been forecast in Knight Frank's Global Cities 2018 report, which reveals that Brisbane is on track to achieve double-digit prime rental growth by year-end 2020.
Brisbane ranks second on place on a list of Asia Pacific cities, behind Manila, which leads the ranking with anticipated growth of 19.1 per cent.
Melbourne is at ninth on the list with forecast growth of 7.4 per cent, while Sydney comes in at tenth place with 5.8 per cent growth.
The report also revealed that Brisbane’s prime office yields sit at 28th in the world out of the 34 cities monitored, at 6.38 per cent while Sydney and Melbourne were at 20th and 22nd with respective yields of 5.06 per cent and 5.25 per cent.
According to Knight Frank’s head of office leasing David Howson, “Brisbane is forecast to be higher than Sydney and Melbourne over the next years to 2020 being in the early stages of growth, while Sydney and Melbourne have been in this strong growth phase for the past few years.”
Knight Frank director of research Michelle Ciesielski said modest but steady improvements to the leasing market are now confirmed for Brisbane’s CBD, with prime net effective rents forecast to sit at 6% higher by the end of 2017 than one year ago.
“This was due to both face rent improvement and slight incentive erosion,” she said.
“Tenant activity in Brisbane is expected to remain at improved levels during the remainder of 2017, with the quantum of deals mostly coming from tenants requiring sub-500 square metres.
“Prime yields have continued to firm in the Brisbane CBD, having fallen to a median range of 5.8 per cent to 6.95 per cent as demand continues to grow and the breadth and depth of potential purchasers expands,” Ciesielski said.
Knight Frank Queensland managing director Ben McGrath said that investor interest continued to build in the Brisbane CBD market due to the Sydney and Melbourne CBDs recording ever-lower yields and a climate of fewer opportunities.
“The certainty that the leasing market has bottomed in the Brisbane CBD is providing impetus to the investment market with the view that now is the time to purchase assets to fully benefit from the expected recovery in tenant demand,” McGrath said.
“Additionally, the demand from large tenants for new space will provide the opportunity to secure core investments with limited national supply of these assets.”
