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News release

Brisbane

Brisbane Commercial Property Outlook: 2009

The market will avoid a 1990s type slump


BRISBANE, 25 MARCH 2009 – Brisbane commercial property will not endure an over-supply of space of the magnitude that crippled the market in the early 1990s, Jones Lang LaSalle Research Director Leigh Warner told an audience at a Client Briefing Breakfast this morning.
 
“While the magnitude of the current economic slowdown is comparable and its duration is likely to be longer than in early 1990s, its impact on commercial property will not be as large, simply because supply side conditions are vastly different now to what they were in the early 1990s,” he said.
 
According to Mr Warner, it was the commercial office sector that experienced the most severe over-supply in the 1990s, and it took the market over a decade to return to balance, and then a further five years before developers had the confidence to increase the supply cycle.
 
“By the time the recession hit in 1990 the Brisbane office market had grown by 38% over the preceding four years, vacancy had already reached above 8.5%, and the buildings under construction were the ‘speculative froth’ at the height of a building boom,” he said.
 
“In contrast, the current economic slowdown has hit at a time when vacancy remains very low after an extended period of under-supply and, while 2009 will see a record 221,400sqm of stock added to the market, it is around three-quarters committed and far from speculative froth.
 
“Indeed, it has been the credit crunch at the heart of the current economic slowdown that has itself stopped speculative development from gaining momentum and saved the Brisbane office market from following the same damaging pattern as the 1990s.”
 
Mr Warner told the audience that the Brisbane industrial and retail property markets were at even less risk of substantial over-supply. “Like the office market, new construction activity almost stopped in its tracks in 2008 in the industrial and retail market as finance dried up.”
 
Mr Warner said it was the view of Jones Lang LaSalle that while the Brisbane CBD vacancy rate will rise rapidly to around 10% over 2009, it will stabilise quickly beyond this year and the market will begin to strengthen again in 2011 as Queensland resumes a strong growth path and employment growth recovers.