Office Sector Outlook Brightens as Vacancy Rates Stabilise

The take up of office space in major CBD markets has exceeded pre-pandemic levels as the market starts to stabilise.

Office vacancy rates are levelling out and leasing of space is at its highest point since 2018, according to Dexus’ quarterly review.

The group’s outlook for commercial property remains strong with business confidence levels improving and restrictions easing as vaccination targets are achieved.

The report said that while office transactions remained below average, demand supported valuations for high quality assets.

Dexus head of research Peter Studley said conditions for real estate were generally expected to improve during the next year.

“While lockdowns in New South Wales and Victoria caused a contraction in economic growth, much of the lost ground is expected to be recovered over the remainder of the 2022 financial year,” Studley said.

“Leasing markets are expected to improve in all sectors, helped by positive business conditions.

“In addition, investment demand and capital flows for real estate are likely to remain supported by low interest rates.”

In Brisbane, a limited supply and stable demand led to the 2500sq m of net absorption although there were more incentives given to tenants.

Brisbane records two major CBD sales

The Brisbane Olympics has renewed interest in the Queensland capital with the sale of 444 Queen Street and 299 Adelaide Street both within the golden triangle.

PGIM Real Estate picked up the Queen Street asset overlooking Customs House for $54.4 million from Abacus Property Group and The ­Public Trustee of Queensland.

The 22-storey building in the city’s financial precinct has 13,0967sq m of space and is expected to be refurbished.

The deal was brokered by Tom Phipps from CBRE and Justin Bond from Knight Frank.

PGIM also partnered with Fortius Funds Management last month to buy a $214 million tower down the road at 307 Queen Street.

Meanwhile, a private client represented by UBS Asset Management picked up the nearby 299 Adelaide Street tower. The client is understood to have paid $85 million to buy the asset from the Pidgeon family.

The 10-storey building was built in 2007, and has 9000sq m and a weighted average unexpired lease term at 5.5 years.

Earlier in the month ISPT also sold its golden triangle tower at 100 Creek Street for $184.7 million to Cromwell Property Group.