Savills Research Queensland
Briefing Brisbane CBD Office February 2018
Highlights A Grade Averages Latest 12mo Diff Outlook There was a clear turnaround in Queensland across all Rental – N.F ($/sq m) 540 +10.2% key economic indicators in the latter half of 2017, on the 46.0 -100bps back of a rebound in the Mining sector; Net Incentives (%) Rental – N.E ($/sq m) 290 +11.5% The overall vacancy rate for Brisbane CBD was 16.2% Yield – Market (%) 6.65 -25bps as at December 2017, up from 15.3% in December 2016; IRR (%) 8.00 -15bps Capital Values ($/sq m) 9,000 +12.5% Total net absorption was recorded at -40,879 square metres in the 12 months to December 2017; Demand & Supply Latest PCP*
Grade capital values grew 12.5% over 2017, with Vacancy (%) 16.2 15.3 an increase in interest from both foreign and local institutional investors; Net Absorb. (‘000 sq m) -40.9 94.6 Stock U/C (‘000 sq m) 47.7 75.9 Investors are turning their attention to Brisbane, as strengthening demand and a limited supply profile over - % of market 2.1 3.4 the next 12-18 months point to a pick-up. - % committed - -
*PCP = Previous Corresponding Period Savills Research | Briefing Notes – Brisbane CBD February 2018
Report Contents Senior Analyst — Research Vacancy & Availability 3 Leasing Activity & Demand 4 Shrabastee Mallik Sales Activity 6 [email protected] Supply & Development 8 Rents & Outlook 9 Key Indicators 10 For our latest national reports, visit savills.com.au/research Key Contacts 10 To join Savills Research mailing list, please email [email protected]
Executive Summary Looking at the significant change in the Brisbane CBD story over the last 10 years provides a good explanation of current market conditions and dynamics. 10 years ago Brisbane’s vacancy rate sat close to 1%, rents were at record highs and tenants de-centralised from the market due to both cost constraints and a lack of options; which subsequently led to a strong oversupply from developers. This, coupled with a mining and government contraction, led vacancy rates to now sit close to a record high of 16.2%.
Following a year of materially high net supply coming onto the market in 2016, the Brisbane CBD appears to be at a point where a recovery is evident. Not only is stock under construction limited over the next 3 years (representing 2.0% of current stock in Brisbane CBD compared to 3.4% a year ago), demand drivers are much stronger than they were 12 months ago, with a recovery in the mining sector, positive net interstate migration and government expansions, likely to provide a much needed boost to Brisbane CBD’s leasing market. Whilst 12 month net absorption was negative in December 2017, a turnaround is evident, with an increase in expressions of interest for space above 10,000 square metres are becoming evident, driven by expansions from the Government sector and Finance & Insurance firms.
There has been a clear pick-up in investment activity in Brisbane CBD, led by foreign investors. With a notable spread still evident between Brisbane CBD and Sydney and Melbourne CBDs, Brisbane CBD is proving to be an attractive alternative with investors.
PCA Summary Table – Brisbane CBD (as at Dec-17)
Premium A Grade Prime Secondary Total AUS CBD
Total Stock (‘000) 335.5 936.6 1,272.1 983.3 2,255.4 17,9 3 6.8
Total Vacancy (‘000) 40.2 123.3 163.5 202.3 365.8 1,763.3
Vacancy (%) 12.0 (8.6) 13.2 (9.0) 12.9 (9.0) 20.6 (14.1) 16.2 (11.6) 9.8 (8.9)
Net Absorption (‘000) 0.9 (15.6) 4.3 (20.7) 5.2 (36.2) -46.1 (-22.3) -40.9 (13.9) 142.3 (171.8)
Net Absorption (%)* 0.3 (7.8) 0.5 (3.0) 0.5 (4.0) -5.6 (-2.5) -2.1 (0.8) 0.9 (1.1)
Net Additions (‘000) 0.0 (19.5) 18.3 (32.9) 18.3 (52.5) -43.0 (-3.1) -24.7 (49.3) -49.4 (303.2)
– Stock Additions (‘000) 0.0 18.3 18.3 0.0 18.3 254.4
– Stock Withdrawals (‘000) 0.0 0.0 0.0 0.3 43.0 3 07.9
Net Additions (%) 0.0 (9.1) 2.0 (4.4) 1.5 (5.5) -4.2 (-0.3) -1.1 (2.5) -0.3 (1.9)
Source: PCA / Savills Research (10yr Averages shown in brackets); * As a percentage of occupied stock; NB: Secondary Rents shown are for B Grade; All rents equivalent to whole floor mid-rise
savills.com.au/research 02 Savills Research | Briefing Notes – Brisbane CBD February 2018
Vacancy The overall vacancy rate for Brisbane CBD was 16.2% as at December 2017, up from 15.3% in December 2016. A flight to quality was evident with businesses taking up space in Premium grade buildings, over lower-grade office space. Whilst the Premium grade vacancy rate recorded a marginal fall over 2017, it was not enough to offset higher vacancy rates across Grade A and Grade B office buildings. However, it is important to note that Grade A vacancies remained elevated at 13.2% in December, largely as a result of the refurbishment of 310 Ann Street, which was completed on a largely speculative basis.
Positively, vacancy rates look to have reached a peak, with an increase in tenant expressions of interest likely to aid vacancy rates downwards. New tenant demand looks positive for 2018, with a number of enquiries from tenants in the Financial & Insurance Services (Suncorp – 40,000 square metres) and the Government & Community sectors (ATO – 24,000 square metres).
Historic Vacancy Rate Full Floor Availability by Period
25% 25% PrimePrime SecondarySecondary TotalTotal 120120 PremiumPremium (No (No of Floors)of Floors) A GradeA Grade (No (No of Floors)of Floors)
20%20% 100100
8080 15%15%
6060 10%10%
4040 5%5% 2020 0%0% 0 0 In 6In Mths 6 Mths 6 -126 -12 Mths Mths 1 - 12 -Yrs 2 Yrs > 2> Years 2 Years
Source: PCA / Savills Research Source: Savills Research
Full Floor Availability
The Savills Prime Full Floor Availability Report assesses the state of the leasing market in a different manner to standard vacancy surveys. The report shows each Premium and A Grade building in the city on a floor-by-floor basis highlighting which floors are available for lease, now and in the near future, including those under construction and refurbishment.
The Brisbane CBD office market currently has a total supply of 259,472sqm available across 279 floors, which represents a total of 13.1% of full floors available to the market across all building grades. Premium grade buildings currently have the least full floors available, with 19 full floors available to market. A Grade buildings have 93 full floors available whilst B Grade buildings currently has the greatest full floors available to market, with 167 floors.
By Grade By Precinct
Premium A Grade B Grade Financial Uptown Govt. Retail Legal
Total Prime Floors (No) 170 810 898 602 499 376 203 198
Total Prime NLA (sq m) 259,852 973,889 742,359 643,530 474,221 400,176 207,619 250,554
Prime Floors Available (No) 19 93 167 76 94 41 17 51
Prime Full Floor Avail. (sq m) 26,931 105,664 126,877 76,635 86,892 30,357 15,108 50,480
Prime Full Floor Avail. (%) 10.4 10.8 17.1 11.9 18.3 7.6 7.3 20.1
Max Contiguous Floors (No) 6 11 17 6 10 17 6 12
Max Contiguous Area (sq m) 7,3 42 12,673 12,163 7,3 42 8,191 9,747 7,6 9 8 12,673
Source: Savills Research
savills.com.au/research 03 Savills Research | Briefing Notes – Brisbane CBD February 2018
250,000 Financial Government Legal Retail Uptown
Leasing250,000 ActivityFinancial by PrecinctGovernment (> 1,000Legal squareRetail metres)Uptown Leasing Activity & Demand 200,000 In the 12 months to December 2017, Savills Research 250,000 200,000 Financial Government Legal Retail Uptown identified 126,929 square metres of leasing activity. This 150,000 is down 12.7% on the 12 months prior and in line on the 200,000 150,000 10 year average (128,225 square metres). The majority of 100,000 these leases (approximately 30.6% of total space) occurred 150,000 100,000 in the Uptown precinct. 50,000 100,000 50,000 Looking at leasing volume by grade, Prime grade leases - were the most numerous with 112,272 square metres 50,000 leased over the year to December 2017, accounting for - close to 90% of total leasing activity in Brisbane’s CBD office market. ‘Direct’ leases (74,168 square metres) accounted - for the majority of office space leased, comprising 58% of the market. As expected, with little supply due to come on board over the next 2 years, pre-commitment activity remained muted, with only 1 pre-commitment lease signed Source: Savills Research in 2017. Leasing Activity by Tenant Type (> 1,000 square metres) Mining - 24.4% Of the total area leased in Brisbane CBD over the last 12 Mining - 24.4% months, tenants from the Mining & Utilities industry were the Fin & Ins - 21.2% most dominant, leasing 24.4% of total stock from a total of MiningFin & Ins - 24.4% - 21.2% 7 transactions (30,577 square metres). Smaller tenants in IT & Comm - 20.1% the Property & Business Services sector were more evident FinIT & & Comm Ins - 21.2% - 20.1% with over 60 leases signed in the sub 1,000 square metre Govt & Community - 16.2% leasing market. The largest leasing transaction in 2017 was ITGovt & Comm & Community - 20.1% - 16.2% Telstra’s renewal of 19,577 square metres of space at 275 Prop & Bus Serv - 14.6% George Street, followed by Q Super’s pre-commitment to GovtProp && CommunityBus Serv - 14.6% - 16.2% 17,200 square metres of office space in Brisbane Square Undisclosed - 2.0% Tower, which is due for completion in 2020. PropUndisclosed & Bus Serv - 2.0% - 14.6% Rec Serv - 1.5% Negative annual growth in professional job advertisements UndisclosedRec Serv - 1.5% - 2.0% in the year to June 2017 (-1.7%) predicated negative net absorption in Brisbane CBD in the current period. Total Source: Savills Research Rec Serv - 1.5% net absorption was recorded at -40,879 square metres in the 12 months to December 2017. Whilst Prime grade Net Absorption vs. Growth in Professional Job Ads office space recorded positive tenant demand (at 5,232 square metres over the same 12 month period), this was more than offset by negative net absorption for Secondary 150,000 Annual Net Abs. - BRI CBD 30% Prof. Job Ads - QLD grade office market. This was as a result of a combination 150,000 Annual Net Abs. - BRI CBD 20%30% 100,000 of a flight to quality and withdrawals in lower grade office Prof. Job Ads - QLD 10%20% buildings, with 28,000 square metres of withdrawals of 150,000 100,000 Annual Net Abs. - BRI CBD 30% 50,000 Prof. Job Ads - QLD 10% Secondary grade buildings recorded in the 6 month to 20%0% 100,000 50,000 December 2017. 0% - 10%(10%) 50,000 - (20%)(10%) Latest figures for professional job advertisements show (50,000) 0% an annual growth rate of 6.2% in Queensland, pointing (20%) (50,000) - (10%)(30%) to a pickup in leasing demand in the year to come. This (100,000) (30%) (20%)(40%) is further supported by current expressions of interest for (100,000) (50,000) (40%) office space indicating large take-ups of space in 2018 are (150,000) (30%)(50%) imminent. (100,000) (150,000) (50%) (40%)
(150,000)Source: DOE / Savills Research (50%)
savills.com.au/research 04 Savills Research | Briefing Notes – Brisbane CBD February 2018
There was a clear turnaround in Queensland across all key Professional Job Advertisement Growth by State (Dec-17) economic indicators in the latter half of 2017, on the back of a rebound in the Mining sector. State Final Demand was NSW 0.5% recorded at 3.0% over the year to September 2017, the AUS highest level of growth since 2013. In addition, a turnaround 5.5% in the labour market was evident with employment growth ACT 5.7% recorded at 4.63% (over the year to December 2017) the highest nationally. QLD 6.2%
There was a positive spill over effect on professional job VIC 9.1% advertisements, on the back of 40% growth in engineering jobs in Queensland (as a result of major project completions WA 14.8% in the mining sector). With professional job advertisements a forward looking indicator for office net absorption, it is SA 15.5% clear that office leasing demand is expected to be positive in CBD over 2018. Added to this, a limited supply profile 0% 5% 10% 15% 20% continue to support a story of recovery in Brisbane CBD’s Source: DOE / Savills Research office market over the short to medium term.
Recent Notable Leases (by Area Leased)
Tenant Property Date | NLA (sq m) Type | Rent | Term
Telstra 275 George St, Brisbane Jan-17 | 19,577 Renewal | 775 (G) | 10
Origin Energy 172-180 Ann St, Brisbane Mar-17 | 16,350 Direct | 765 (G) | 17
Stanwell Corporation 180 Ann Street, Brisbane Aug-17 | 4,000 Direct | 665 (G) | 10
Telstra 69 Ann St, Brisbane Jan-17 | 3,501 Renewal | 685 (G) | 7
AMP Capital 172-180 Ann St, Brisbane Dec-17 | 3,344 Direct | n.a | n.a.
Stanwell Corporation 172-180 Ann St, Brisbane Apr-17 | 3,344 Direct | 665 (G) | 10
Allianz Global 111 Eagle St, Brisbane Jun-17 | 3,001 Sublease | 585 (G) | 2
Queensland Treasury Corporation 111 Eagle St, Brisbane Feb-17 | 2,832 Sublease | 875 (G) | 8
Times Education Group Australia 316 Adelaide St, Brisbane Mar-17 | 2,457 Direct | 500 (G) | 7
Ray White Group 111 Eagle St, Brisbane Apr-17 | 2,357 Renewal | n.a | 5
Expedia 480 Queen Street, Brisbane Aug-17 | 1,903 Direct | 746 (G) | 6
Browns English Language School 102 Adelaide St, Brisbane Sep-17 | 1,869 Direct | 550 (G) | 5
QEC (QLD Electoral Commission) 1 Eagle St, Brisbane Sep-17 | 1,822 Direct | 825 (G) | 5
Williams Hall Chadwick 240 Queen Street, Brisbane Aug-17 | 1,712 Direct | 650 (G) | 10
TBA 172-180 Ann St, Brisbane Dec-17 | 1,672 Direct | n.a | n.a.
Arcadis (former Hyder Consulting) 120 Edward St, Brisbane Feb-17 | 1,625 Direct | 600 (G) | 4
Energy Super 123 Eagle St, Brisbane Aug-17 | 1,600 Direct | 795 (G) | 10
Boeing 144 Edward Street, Brisbane Nov-17 | 1,538 Direct | 600 (G) | 4
Department of Public Works 400 George St, Brisbane Dec-17 | 1,461 Sublease | 675 (G) | 2
Lifeflight Australia 32 Edward St, Brisbane Sep-17 | 1,451 Direct | 595 (G) | 7
Source: Savills Research
savills.com.au/research 05 Savills Research | Briefing Notes – Brisbane CBD February 2018
$3,000m $3,000m $5m - $50m $50m$50m - -$100m $100m >$100m>$100m
$2,500m Sales Activity Sales$2,500m Activity by Price (> $5 million) $2,000m Savills Research recorded $1.30 billion of sales transactions $2,000m$3,000m $5m - $50m $50m - $100m >$100m (> $5 million) of Brisbane CBD office assets in 2017, up $1,500m $2,500m 16% from $1.12 billion in 2016 and 14% above the 10 $1,500m $1,000m year average of $1.14 billion. Relative pricing, especially $1,000m$2,000m compared to Sydney and Melbourne, proves to be a draw $500m card for foreign and domestic investors alike. Record low $1,500m$500m yields and limited assets available for sale in Sydney and $0m Melbourne’s CBD office markets, has led to more investors $1,000m$0m turning their attention to Brisbane. Strengthening demand and a limited supply profile over the next 12-18 months is $500m further adding to the attractiveness of investing in Brisbane CBD office assets. $0m
‘Foreign Investors’ and ‘Funds’ were the most dominant purchaser types, accounting for 44.6% of all buyers Source: DOE / Savills Research each, though buyers from non-Asian countries were more dominant, unlike in Sydney and Melbourne. Most notably, Vendor & Purchaser Type (> $5 million) Blackstone’s purchase of 400 George Street for $210 Vendors million at an equated yield of 6.41% in July 2017. Vendors Local institutional investors are also increasingly seeing the value and counter-cyclical opportunity investing in Brisbane’s office markets represent. Domestic ‘Funds’ Purchasers bought $577.17 million of CBD office assets. Notable sales Vendors include the purchase of 32 Turbot Street for $380 by GIC / Purchasers Charter Hall in December 2017, at an initial yield of 5.70% 0% 20% 40% 60% 80% 100% Fund Trust Developer and Unity Office Fund’s purchase of 150 Charlotte Street Owner Occupier Government Syndicate for $105.75 in October 2017 at an initial yield of 6.83%. 0% 20% 40% 60% 80% 100% Purchasers Foreign Investor Private Investor Other Fund Trust Developer Market valuation yields in Brisbane CBD, as at December Owner Occupier Government Syndicate Foreign Investor Private Investor Other 2017, typically estimated to range from 5.50% to 6.00% Source: Savills Research for Premium grade buildings and 7.00% to 8.25% for B 0% 20% 40% 60% 80% 100% Grade buildings. The average yield for Brisbane CBD office Fund Trust Developer Yield SpreadOwner to OccupierBond & IRRGovernment – Brisbane CBD Syndicate buildings pointed to a 25 basis point firming over the last Foreign Investor Private Investor Other year. 12% 10yr Bond Rate Average Brisbane CBD (Grade A Yield) There remains a notable spread between Brisbane CBD 10% Average Brisbane CBD (Grade A IRR) and Sydney CBD yields with commentary suggesting, 12%8% 10yr Bond Rate whilst Sydney CBD is nearing a peak, Brisbane CBD is Average Brisbane CBD (Grade A Yield) projected for further tightening over 2018 as a result of the 10%6% Average Brisbane CBD (Grade A IRR) ‘lower for longer’ outlook for interest rates and long-term 4% bond rates in conjunction with a positive outlook on leasing 12%8% 10yr Bond Rate activity. Average Brisbane CBD (Grade A Yield) 2% 10%6% Average Brisbane CBD (Grade A IRR) % 4%8%
2%6%
Source: Savills Research 4%%
2%
%
savills.com.au/research 06 Savills Research | Briefing Notes – Brisbane CBD February 2018
Given the significant difference in capital values between Capital Value ($/sq m) vs. Market Yield Brisbane CBD and Sydney CBD, renewed interest for 12,000 Capital Value - BRI CBD 8.5% Brisbane office assets is likely over the short to medium Market Yield (RHS) term, particularly as a diminishing level of supply and 10,000 strengthening demand create a positive tenancy outlook. 8.0% As work begins on the Queens Wharf and Howard Smith 8,000 Wharf construction projects, investors have seen the 7.5% Brisbane story start to come alive. 6,000 7.0% Interest from foreign investors in particular is likely to 4,000 help boost investment activity in Brisbane CBD as focus 6.5% moves away from the Southern cities to more affordable 2,000 options. In this sense, Brisbane CBD provides an attractive alternative, with commentary suggesting a floor has been 6.0% reached for rents.
Source: Savills Research
Recent Notable Sales (by Sale Price)
Property Price ($m) | Date | NLA Yield | Type | $/sq m
32 Turbot St, Brisbane 370.00 | Dec-17 | 34,699 5.70 | i | 10,951
400 George Street, Brisbane (50.0%) 210.00 | Jul-17 | 43,493 6.43 | e | 9,657
State Law Bldg 144.62 | Jan-17 | 25,519 8.23 | e | 5,667
120 Edward Street, Brisbane 142.65 | Jun-17 | 15,271 6.15 | e | 9,341
160 Ann Street, Brisbane 119.50 | Sep-17 | 15,984 6.03 | e | 7,476
108 Wickham St, Brisbane 106.20 | Dec-17 | 11,913 6.10 | i | 8,915
150 Charlotte Street, Brisbane 105.75 | Aug-17 | 11,011 5.95 | e | 9,604
150 Charlotte St, Brisbane 105.75 | Oct-17 | 11,011 6.83 | i | 9,604
545 Queen St, Brisbane 70.50 | May-17 | 13,581 8.87 | e | 5,191
Health & Forestry House 70.00 | Apr-17 | 26,782 n.a | n.a | 2,614
40 Tank Street, Brisbane 56.10 | Apr-17 | 6,218 6.16 | e | 9,022
180 Queen St, Brisbane 55.00 | Dec-17 | 3,654 n.a | n.a | 15,052
17 Tomlins St, Townsville 28.60 | Dec-17 | 9,414 9.20 | i | 3,038
433 Logan Road, Brisbane 27.60 | Nov-17 | 5,664 n.a | n.a | 4,873
370 Queen Street, Brisbane 23.50 | Jun-17 | 3,831 n.a | n.a | 6,134
380 Queen Street, Brisbane 23.00 | Jun-17 | 4,246 n.a | n.a | 5,417
Source: Savills Research; i = Initial, r = Reported, e = Equated, v = Vacant, dev = development
savills.com.au/research 07 Savills Research | Briefing Notes – Brisbane CBD February 2018
Supply Net Supply by Year (square metres) After a burst of development activity in 2016, office supply Historic Net Additions 140,000 Savills Forecast in 2017 was relatively muted, with only the completion of 15yr Avg 310 Ann Street’s refurbishment bringing 18,450 square 120,000 metres of space on the market. With no supply due for 100,000 2018 for completion, a low supply environment will help buoy market fundamentals in Brisbane CBD and reduce 80,000 vacancy rates. Beyond that, only the 47,700 square metre development of 300 George Street, which is due for 60,000 completion in 2020 is currently under construction. 40,000
The high level of development activity in Brisbane CBD 20,000 seen in 2012 and 2016 has been a key reason for stagnant rental growth. Limited upcoming supply is likely to help - rental and capital value growth over the short to medium (20,000) term. (40,000)
Source: Savills Research / PCA
Development
The table below details the major upcoming and planned development projects in the Brisbane CBD.
Building Address Dev Stage NLA Exp. Comp Precinct Tenants
261 Queen St DA 1,046 2019 Financial
320 George St DA 9,060 2019 Legal
360-380 Queen Street EP 45,000 2020 Financial
300 George Street UC 47,70 0 2020 Legal
Regent Tower (150 Elizabeth Street) Mooted 35,000 2021+ Retail
62-80 Ann Street EP 55,000 2021+ Legal
200 Queen Street EP 240,000 2021+ Retail
62-80 Ann Street EP 55,000 2021+ Legal
Source: Savills Research
savills.com.au/research 08 Savills Research | Briefing Notes – Brisbane CBD February 2018
Rents Net Effective Rents by Grade ($/sq m) 900 Premium Grade A Grade B 900 Premium Grade A Grade B After years of stagnant rental growth in Brisbane CBD over 800 800 the last 5 years, a turnaround is evident with average Grade 700 A net face rents growing 10.2% over the year to December 700 600 2017, with growth in average Grade A net effective rents 600 (9.4% over the same period) slightly higher as a result of a 500 500 80 basis point compression in incentives. An environment 400 400 of strengthening demand coupled with a limited supply 300 pipeline, is likely to push rents higher over the next 2-3 300 200 years, although at a muted rate. 200 100 100 - Similarly, rents in Brisbane CBD’s secondary market were - on the rise with growth in average Grade B net face rents of 4.9% over the year to December 2017, whilst average Grade B net effective rents grew by 13.5% over the same period. Source: Savills Research
A notable trend of re-centralisation is prevalent with former Net Face & Net Effective Rents as at Dec-17 ($/sq m) fringe tenants looking to relocate to the CBD, as evidenced by Origin Energy at 180 Ann Street and Allianz rumoured to Net Face Net Effective Incentive (Net Basis % RHS) be moving down the road at 310 Ann Street. 800 60.0 Net Face Net Effective Incentive (Net Basis % RHS) 800700 60.0 Given the muted supply pipeline over the next 3 years, 50.0 600 rental rates are expected to creep upwards as vacancy 700 40.050.0 tightens. 600500 40.0 500400 30.0 300 400 20.030.0 200 300 10.020.0 100 200 0 0.010.0 100 Premium A Grade Secondary 0 0.0 Source: Savills Research Premium A Grade Secondary
Outlook
A turnaround in Brisbane CBD is evident as a rebound in the mining sector help to buoy demand drivers mixed with a muted supply pipeline. Whilst falling mining investments and a struggling economy over the last 5 years in Queensland translated to weaker office leasing demand and kept a cap on rental and capital value growth rates, current indicators suggest a floor has been reached. There appears to be strong renewed investor interest in Brisbane CBD as both domestic and offshore buyers focus their attention north of Sydney and Melbourne in search of better yields and cheaper investment alternatives. A pickup in the state economy is further evident with a rebound in mining sector profits, major mining project completions and strong population growth likely to translate to stronger demand.
The Brisbane sales market has seen a flight of capital enter from both domestic and foreign investors, realising the significant capital value discount to Sydney. With a notable spread between Brisbane CBD and Sydney CBD evident, current market conditions point to more room for tightening in Brisbane CBD. Savills Research anticipates further tightening of capitalisation rates as interstate and global players seek to take advantage of the yield arbitrage compared to Southern cities. Rental rates are expected to creep upwards as vacancy rates tighten as a result of limited supply due to hit the market over the short term.
savills.com.au/research 09 Savills Research | Briefing Notes – Brisbane CBD February 2018
Brisbane CBD Key Indicators (Q4-17)
Premium A Grade B Grade
Low High Low High Low High
Rental – Gross Face ($/sq m) 795 900 625 750 545 605
Rental – Net Face ($/sq m) 635 740 475 600 400 460
Incentive Level (Gross) 30% 38% 32% 40% 35% 42%
Rental – Net Effective ($/sq m) 365 435 250 330 190 225
Outgoings – Operating ($/sq m) 70 120 70 100 75 90
Outgoings – Statutory ($/sq m) 55 75 55 75 50 75
Outgoings – Total ($/sq m) 125 195 125 175 125 165
Typical Lease Term 7 10 4 10 3 8
Yield – Market (% Net Face Rental) 5.50 6.00 6.00 6.50 7.0 0 8.25
IRR (%) 6.75 7.50 6.75 7.50 7.50 8.50
Cars Permanent Reserved ($/pcm) 500 850 450 650 350 550
Cars Permanent ($/pcm) 450 650 400 550 300 500
Office Capital Values ($/sq m) 10,750 13,500 7,000 11,000 4,500 7,000
Source: Savills Research NB: All rents equivalent to whole floor mid-rise
Key State Contacts
Research Capital Transactions Valuations Project Management Shrabastee Mallik Peter Chapple Brett Schultz Ken Ng +61 (0) 2 8215 8856 +61 (0) 7 3002 8858 +61 (0) 7 3002 8855 +61 (0) 7 3018 6705 [email protected] [email protected] [email protected] [email protected] Metro & Regional Sales Office Leasing Asset Management Capital Transactions Robert Dunne John McDonald Howard Chapman Christopher Camphin +61 (0) 7 3002 8806 +61 (0) 7 3002 8847 +61 (0) 2 8686 8870 +61 (0) 7 3002 8829 [email protected] [email protected] [email protected] [email protected]
The Savills Research & Consultancy team has years of experience, and is supported by our extensive agency, property management and valuation professionals. For national-level consultancy or subscription requirements please contact:
Capital Strategy & Research Chris Freeman +61 (0) 2 8215 6093 [email protected]
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