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News release

Brisbane’s property market to pre-GFC strength in 18 months to two years – Mark Curtain, Jones Lang LaSalle


BRISBANE, June 29, 2011 – Jones Lang LaSalle’s Director of Office Leasing in Queensland Mark Curtain has predicted the Brisbane Office Market will be back to pre-GFC strength in 18 months to two years based on early Q2-2011 market research and performance.
 
While Q2 research won’t be released for another two weeks following the end of the financial year, Curtain said the market was continuing to tighten now, and that beyond 2012, key markers across demand, vacancy and investment were indicating strength.
 
“Vacancy was 7.9% at the end of Q1/2011 and our preliminary Q2 numbers suggest that the rate will fall to low 7%’s or high 6%’s, he said. Furthermore, the vacancy rate for prime space is approximately 4.5% (Q1, 2011) and as a result incentives are starting to slowly retreat from their peak in 2010,” he said.
 
“Leasing activity has continued to surprise on the upside. While all sectors have been active, of particular note is the activity at the premium end of the market with Piper Alderman (1,200sqm), Bell Potter (800sqm), Gadens Lawyers (5,700sqm), Thompson Lawyers (1,800sqm) and EY (7,500sqm) all announcing commitments to Brisbane’s premium riverfront precinct in 2011,” he said.
 
“Tenants are recognizing that the office market is poised to enter another a period of sustained growth and are therefore making relocation decisions well ahead of lease expiry”. 
 
While a lot of the mining & resource activity is project related and therefore generally seeking short term secondary space, this still puts pressure on the overall market dynamics. This has been clearly evident over the past 12 months.”
 
“We expect demand to remain strong on the back of strong enquiry level. As an indicator of larger tenant demand, we have tracked all major tenant representative-led requirements in the market and the total size of requirements has increased by around 20% over the year to June 2011. This is good news.”
 
In terms of a 12 month Outlook, Curtain said he expected the CBD vacancy to rise over the next 12 months as several developments, including Dexus’ 123 Albert Street, GPT’s 111 Eagle Street and the Colonial-owned 145 Ann Street, add new space to the market and create some back fill space.
 
“However, there will not be as much back fill space created as previously thought,” he said.

“At 123 Albert Street for example, Rio Tinto has expanded its commitment to over 30,000sqm and will also maintain several other sites around Brisbane.
 
“Then, over at 145 Ann Street, both GHD and Grant Thornton have exercised expansion options over and above their initial commitments.”
 
“Leasing of 111 Eagle Street has also gained momentum, with three commitments totaling 17,800sqm (to Norton Rose, Gadens and Ernst & Young) now announced, all incorporating some moderate expansion. There are also several other major deals in negotiation and GPT is on track to far exceed its target of 40% commitment on completion,” he said.
 
Curtain also spoke of beyond 2012 and the new supply under construction.
 
“The market is expected to tighten relatively quickly due to a lull in the supply pipeline and further strong demand.”
 
“The strength of demand is likely to be much broader based as the Queensland economy kicks back into gear. 
 
Commitments to major mining investment projects have now been made and we are now at the stage where significant employment is starting to be created. This employment creation will boost net interstate migration into Queensland, which in turn will boost the subdued housing and retail markets in the region.”
 
“As confidence snowballs across the economy, with 18 months we expect to be back in a very strong broad-based economy similar to what Queensland was in prior to the GFC.”