Brisbane CBD ranks 11th globally for value in prime office space: Knight Frank

Brisbane CBD ranks 11th globally for value in prime office space: Knight Frank
Brisbane CBD ranks 11th globally for value in prime office space: Knight Frank

Brisbane is at the 11th spot among global cities for the most office floor space that can be bought for US$100 million, fetching 14,607 sqm in the CBD area but this could change as the leasing market recovers and prices head north, says a new report by Knight Frank.

The report, Global Cities 2018, compares how much USD100 million will buy of prime office space in 34 top cities across the world. 

Melbourne and Sydney sit at 15th and 23rd on the list respectively, with Melbourne fetching 12,719 sqm of CBD office space for USD100 million while the same money can get you 7,087 sqm in Sydney.

Knight Frank’s managing director, Queensland, Ben McGrath said that investor interest has continued to build in the Brisbane CBD market due to the Sydney and Melbourne CBDs recording lower yields and a climate of fewer opportunities. 

Brisbane’s office leasing market is recovering, creating limited time to purchase office assets to fully benefit from the expected recovery in tenant demand, according to Knight Frank’s latest research.

“The certainty that the leasing market has bottomed in the Brisbane CBD is providing impetus to the investment market with the view that now is the time to purchase assets to fully benefit from the expected recovery in tenant demand,” said McGrath.

“Additionally, the demand from large tenants for new space will provide the opportunity to secure core investments with limited national supply of these assets.”

Investment demand is also rising because of continued high spread in yields Brisbane has with Sydney and Melbourne, added Knight Frank’s joint head of Institutional Sales, Australia, Ben Schubert.

According to the Global Cities report, Brisbane’s prime office yields sit at 28th in the world out of the 34 cities monitored, with yields at 6.38%, while Sydney and Melbourne are at 20th and 22nd respectively with Sydney yields at 5.06% and Melbourne yields at 5.25%. 

“While both Sydney and Melbourne CBDs are far further through the leasing demand cycle, with signs of improvement in the Brisbane market, investment interest has further increased. Yields remain under downward pressure with interest in the Brisbane market continuing to build. Both the yield gap to Sydney and Melbourne and positive signs in the Brisbane leasing market is underpinning this investment interest,” said Schubert.

Knight Frank’s head of Commercial Sales, Australia Paul Henley said, “Investors are increasingly expanding their global portfolios. Those cities going through an evolution driven by a compelling mix of education, lifestyle, infrastructure, technology and real estate makes them places where people want to work, shop, play, and live.”

Knight Frank’s director, Research, Australia Michelle Ciesielski said prime yields have continued to firm in the Brisbane CBD, having fallen to a median range of 5.8% to 6.95% as demand grows.

“In Sydney, the strong investor demand, particularly from offshore investors, is putting significant pressure on yields across the grades, but more so on secondary assets which have a lower price point,” she said.

She cited the sale of 20 Bridge Street on a sub-5% core market yield as an indicator that prime assets in the CBD core are expected to be traded between 4.5% and 5.25%. 

“This will be further affirmed when the sale of Wynyard Place is concluded, with market expectation for a yield of close to 4.7%,” said Ciesielski.

In Melbourne, fewer buying opportunities with strong investor demand, particularly by offshore investors, has further compressed prime yields, added Henley. 

“Looking ahead, investment volumes are anticipated to remain above the five-year average in 2017. This is unlikely to match volumes recorded in 2014 as impacted by the scarcity of investment opportunities rather than diminishing investor appetite,” concluded Henley.

Brisbane Office Market

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