New Brisbane office campus highlights market confidence: Charter Hall
National property group Charter Hall remains optimistic about the long-term prospects for Brisbane's office market, diversifying its portfolio during the past 12 months to encompass CBD and CBD-fringe office buildings.
The group is one of Brisbane's largest office landlords after the Queensland Government, with its latest $175 million project, 100 Skyring, currently under construction at Gasworks, Newstead.
Charter Hall owns and manages eight other Brisbane office buildings worth about $1.4 billion and home to more than 100 tenants across 205,000sqm. These include 175 Eagle Street, 275 George Street, 300 Adelaide Street, Brisbane Square, Northbank Plaza and Anzac Square.
Charter Hall Regional Asset Manager Belinda Kalinin said in the current environment, those offices that could deliver large, open floor spaces in locations offering work and lifestyle advantages would be the first to be leased.
100 Skyring is our landmark project outside the Brisbane CBD and it is recognition that businesses are seeking quality premises with the growing amenity of a fringe location," she said.
"Newstead in particular is emerging as the dominant CBD fringe location because of its retail, dining and entertainment precincts, transport links and state-of-the-art building designs.
Although Brisbane's near city office vacancy levels are approximately 14.3% the vast majority of this stems from older, secondary assets, evidenced by prime grade vacancy currently at 6%.
Interestingly across both the CBD and near city markets, sublease vacancy comprises almost 20% of the overall market vacancy. And whilst there are some good quality sublease options, which offer a strong value proposition, there are only a limited number of these and of these available sublease options a significant number have term restrictions or other issues which inhibit them as compelling options when compared with direct space available in these markets.
When 100 Skyring is complete later this year, BOQ will occupy 54% of the building, joining the other major organisations, such as Energex, Leighton Contractors, Virgin Airlines and AECOM, that have chosen to base themselves in this area. The Gasworks precinct itself has also attracted the Tatts Group, which is in the design phase of its new national headquarters of circa 21,000sqm.
Ms Kalinin said Brisbane office leasing demand was likely to remain tempered in the short term as businesses continued to focus on cost control. However with Queensland showing 2.67% employment growth in the year to March 2014, the strongest of the major states and more than double the national average, demand could surprise on the upside.
"Office leasing in Brisbane looks likely to remain competitive up to 2016 as new supply is added, but there is also a significant level of secondary stock mooted for withdrawal and conversion. With few new major office buildings planned for the fringe in the short term, there will only be a limited amount of options available in these areas," she said.
"From our perspective, the Brisbane market has proven itself a strong performer over the longer term and with Queensland's population and employment growth remaining well above the national average, Brisbane will continue to form a key part of our $6.1 billion Australian office property portfolio."