Brisbane Office Market's $2 Billion Investment Boom

Brisbane’s office market is starting to feel the positive effects of an economic turnaround coupled with a flurry of investment activity, with more than $2 billion worth transactions taking place in the city's office markets last financial year.

Savills office research recorded $1.2 billion worth of transaction in Brisbane's CBD, with recent news that Mirvac will sell a $418 million stake in its 80 Ann Street tower adding to the upturn in investment in Brisbane's market.

“The Brisbane turnaround story is now taking shape, there is a genuine sense of improvement in the occupier markets and increased confidence from buyers looking to position themselves to take advantage of this dynamic,” Savills' state director of capital transaction in Queensland Peter Chapple said.

"Sales in Brisbane's fringe office markets were driven by interest from both foreign and domestic private investors driving up demand for assets in the $10 million to $50 million range, while domestic institutional investors were driving up demand for larger, more prized prime grade assets."

“We expect this level of interest to increase considerably over the next 6 months as investors chase capital value growth relative to the other east coast markets.”

Chapple believes Brisbane's office market is benefiting from Australia's best labour market indicators, population and economic growth numbers.

Savills research revealed that while the Brisbane CBD fringe market recorded no capital value growth over the year, average A-grade assets in the Brisbane CBD grew 4.4 per cent over the same period.

“There will always be a difference in capital values between the CBD and the Fringe market," Savills associate director of capital strategy and research Shrabastee Mallik said.

“However, given the proximity of the Fringe market to the CBD and the ongoing renewal of Brisbane’s fringe office markets, the differences in prices and yields are much less pronounced than in other office markets nationally,” Mallik said.

While rental growth was largely stagnant over the current financial year, Savills projects there will likely be increases in rents over the next 12-18 months, particularly as larger financial services providers look for more office space in Brisbane CBD.

Savills positive assessment of the Brisbane Market comes less than a month after BIS Oxford Economics warned Brisbane's office market wouldn't recover until the first half of 2020.