Savillsresearch briefing-brisbane-cbd-office-q2-2019

Briefing
Brisbane CBD Office June 2019
Savills Research
Queensland
Highlights
 Office absorption and investment volumes continued to
grow in the 12 months to June 2019, with a recorded
increase of 65% and 61% respectively on the 12 months
prior;
 Investment turnover reached $2 billion for the first time
in six years with offshore buyers accounting for 44%
and domestic funds and trusts jointly accounting for
approximately 50%;
 Contractionary yield pressure remains in the Brisbane
CBD market, with A Grade yield over the last year fell 65
basis points and potential for further firming.
A Grade Averages Latest 12mo Diff Outlook
Rental – N.F ($/sq m) 550 +1.9% 
Net Incentives % 46.0 +00bps 1
Rental – N.E ($/sq m) 295 +1.7% 
Yield – Market (%) 5.75 -65bps 
IRR (%) 6.75 -50bps 
Capital Values ($/sq m) 10,000 +6.4% 
Demand & Supply Latest PCP*
Vacancy (%) 13.0 14.6
Net Absorb. (‘000 sq m) 46.9 -6.1
Stock U/C (‘000 sq m) 173.3 47.7
- % of market 7.8 2.1
- % committed 34.4 -
*PCP = Previous Corresponding Period
Source: Savills Research

June 2019
savills.com.au/research 2
Savills Research | Briefing Notes – Brisbane CBD

Executive Summary
Brisbane is increasing its attractiveness transforming into a destination for both domestic and foreign investors on the back
of Queensland’s economic growth and multi-billion infrastructure investment. With a notable yield and capital value spread
between Brisbane CBD and Sydney and Melbourne CBDs, Brisbane CBD provides an attractive alternative to investors,
clearly evidenced by a pickup in investment activity in the annual period with investment turnover exceeding $2 billion for
the first time since 2013. Continued improvement in the leasing market and rental growth is expected to see investors re-
engage with Brisbane with the search for relative higher yielding assets. However, the effects of the new 2% foreign land
tax fee in Queensland on offshore investors, the most active purchaser group in Brisbane CBD for consecutive periods,
remain to be seen.
Brisbane has recorded the largest drop in office vacancy compared to any other State capital city CBD office market.
Demand drivers in Brisbane are much stronger than they were 12 months ago, with lower interest rates, lower AUD, rising
net migration and government’s dedicated investment in roads and transport infrastructure likely to provide a material boost
to the Queensland economy. Restrained rental growth has seen a trend towards re-centralisation in the CBD, with former
fringe tenants relocating to the CBD.

PCA Summary Table – Brisbane CBD (as at Dec-18)
Premium A Grade Prime Secondary Total AUS CBD
Total Stock (‘000) 335.5 936.6 1,272.1 954.9 2,227.0 17,902.6
Total Vacancy (‘000) 34.8 92.6 127.4 161.6 289.0 1,482.7
Vacancy (%) 10.4 (9.6) 9.9 (9.9) 10.0 (9.9) 16.9 (15.6) 13.0 (12.7) 8.3 (9.4)
Net Absorption (‘000) 7.4 (16.2) 27.2 (21.7) 34.6 (37.9) 12.3 (-20.5) 46.9 (17.4) 230.7 (181.3)
Net Absorption (%) * 2.5 (8.0) 3.3 (3.0) 3.1 (4.1) 1.6 (-2.3) 2.5 (0.9) 1.4 (1.2)
Net Additions (‘000) .0 (19.5) .0 (28.1) .0 (47.7) -28.4 (-9.1) -28.4 (38.6) -46.2 (257.6)
- Stock Additions (‘000) - - - - - 317.8
- Stock Withdrawals (‘000) 0.0 0.0 0.0 28.4 28.4 364.5
Net Additions (%) 0.0 (9.1) 0.0 (3.6) 0.0 (4.8) -2.9 (-0.9) -1.3 (1.9) -0.3 (1.6)
Report Contents
Vacancy & Availability 3
Leasing Activity & Demand 4
Sales Activity 6
Supply & Development 8
Rents & Outlook 9
Key Indicators 10
Contacts 11
For our latest national reports, visit
savills.com.au/research
To join Savills Research mailing list, please email
research@savills.com.au
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
Research & Consultancy
Tracy Tam
ttam@savills.com.au
Head of Research
Phil Montgomerie
pmontgomerie@savills.com.au

June 2019

Vacancy
Positive levels of net absorption and strengthening tenant
demand led to the vacancy rate falling 160 basis points
(1.6%) over the second half of 2018, finishing the year at
13.0%, the lowest rate since 2014.
Savills Research forecasts ongoing falls in vacancy in
Brisbane CBD over 2019, albeit modest, with continued
recentralisation and limited upcoming supply this year.
The only additional supply in 2019 will be limited to the
completion of 300 George Street and Dexus’ 12 Creek
Street Annex project. On Savills Research forecasts the
vacancy rate should trend downwards over the next 5
years.

Full Floor Availability
In Savills’ Prime Full Floor Availability Report, the state of the leasing market is assessed in a different manner to most
vacancy surveys. The report considers Premium and A grade buildings in the city on a floor-by-floor basis, identifying whole
floors competing for tenants - both now and in the future - including those under construction and refurbishment.
By Grade By Precinct
Total Premium A Grade Financial Uptown Govt. Retail Legal
Total Prime Floors (No) 1,081 170 911 426 217 207 90 141
Total Prime NLA (sq m) 1,396,227 260,602 1,135,625 521,199 295,438 274,382 126,251 178,957
Prime Floors Available (No) 165 15 150 58 32 28 6 41
Prime Full Floor Avail. (sq m) 209,346 21,173 188,173 59,818 40,916 44,999 9,003 54,610
Prime Full Floor Avail. (%) 15.0% 8.1% 16.6% 11.5% 13.8% 16.4% 7.1% 30.5%
Max Contiguous Floors (No) 29 4 25 13 5 13 3 25
Max Contiguous Area (sq m) 38,986 4,479 34,507 11,069 11,000 22,596 5,100 34,507
0%
5%
10%
15%
20%
25% Prime Secondary Total
Historic Vacancy Rate
Source: PCA / Savills Research

June 2019
50,000
100,000
150,000
200,000
250,000 <= 5,000sqm 5,000sqm - 10,000sqm > 10,000sqm
Fin & Ins - 45.9%
Govt & Community - 24.2%
Mining - 18.6%
IT & Comm - 8.1%
Prop & Bus Serv - 3.2%
Rec Serv - 0.0%
W'Sale & Retail - 0.0%
Undisclosed - 0.0%
(50%)
(40%)
(30%)
(20%)
(10%)
0%
10%
20%
30%
(150,000)
(100,000)
(50,000)
-
50,000
100,000
150,000 Annual Net Abs. - BRI CBD Prof. Job Ads - QLD
50,000
100,000
150,000
200,000
250,000 <= 5,000sqm 5,000sqm - 10,000sqm > 10,000sqm
Fin & Ins - 45.9%
Mining - 18.6%
IT & Comm - 8.1%
Rec Serv - 0.0%
Undisclosed - 0.0%
(50%)
(40%)
(30%)
(20%)
(10%)
0%
10%
20%
30%
(150,000)
(100,000)
(50,000)
-
50,000
100,000
50,000
100,000
150,000
200,000
250,000 <= 5,000sqm 5,000sqm - 10,000sqm > 10,000sqm
Fin & Ins - 45.9%
Mining - 18.6%
IT & Comm - 8.1%
Rec Serv - 0.0%
Undisclosed - 0.0%
(50%)
(40%)
(30%)
(20%)
(10%)
0%
10%
20%
30%
(150,000)
(100,000)
(50,000)
-
50,000
100,000
Source: DOE / Savills Research

Leasing Activity & Demand
In the 12 months to June 2019, Savills Research identified
135,918 square metres of leasing activity in the Brisbane
CBD office market, up 65% on the 12 months prior, and
up 4% on the 10-year average. Leasing activity in the
‘Legal’ precinct was the most prominent during this period,
accounting for 35% of total leasing activity; the ‘Financial’
precinct followed closely behind accounting for 29% of
total leasing activity.
In the current annual period, the majority of leases in
Brisbane CBD were across Prime Grade buildings,
accounting for approximately 41% of recorded leases. This
is in line with the continued momentum of the ‘Flight to
Quality’ trend which tenants are willing to pay higher prices
for better offerings.
‘Direct’ leases accounted for almost half of the office
space leased, whereas ‘Pre-commitment’ leases remained
prominent with active leasing campaigns on development
projects. This is largely as a result of Suncorp’s 39,600
square metre pre-commitment at 80 Ann Street, and Rio
Tinto’s relocation from 123 Albert Street to pre-commit to
20,000 square metres at Midtown Centre located at 163
Charlotte Street on a 10-year lease term.
Tenants from the ‘Finance & Insurance’ industry remained
the most dominant sector, absorbing 46% of total stock.
Major leases from this sector include Suncorp (39,600
square metres), Westpac (6,643 square metres) and
Gallagher Bassett (2,307 square metres).
The ‘Government & Community’ sector remained active,
accounting for 24% of all total leasing volumes in the
current 12-month period. This was mainly made up of the
State Government’s 10,550 square metre commitment at
83-85 George Street, the Department of Veterans Affairs’
6,414 square metre commitment at 480 Queen Street,
Queensland Rail’s 2,000 square metres commitment at 30
Makerston Street and Australia Post’s 4,503 square metre
commitment at 259 Queen Street.
Leasing Activity by Size (> 1,000 square metres)
Leasing Activity by Tenant Type (> 1,000 square metres)
Net Absorption vs. Growth in Professional Job Ads

June 2019
$0m
$500m
$1,000m
$1,500m
$2,000m
$2,500m $5m - $50m $50m - $100m >$100m
0% 20% 40% 60% 80% 100%
Purchasers
Vendors
Fund Trust Developer
Owner Occupier Government Syndicate
Foreign Investor Private Investor Other
$0m
$500m
$1,000m
$1,500m
$2,000m
$2,500m $5m - $50m $50m - $100m >$100m
0% 20% 40% 60% 80% 100%
Purchasers
Vendors
Fund Trust Developer
Owner Occupier Government Syndicate
Foreign Investor Private Investor Other

Sales Activity
Savills Research recorded approximately $2.06 billion of
office sales in the Brisbane CBD over the 12 months to
June 2019, up 61% from the 12 months prior and up on
the 10 year average of $1.31 billion.
With fewer prime grade assets being put on the market
for sale, we saw a notable increase in the number of
secondary grade buildings transacted ($904 million) in the
current annual period, as investors looked to capitalise on
the development potential.
‘Foreign Investors’ remained the most dominant purchaser
in the year to June 2019, accounting for approximately 44%
of all purchaser types. Singaporean investors remained
robust in the Brisbane CBD, with notable sales of 280
Elizabeth Street to Firmus Capital ($57 million at an initial
passing yield of 5.58%) and 133 Mary Street to ARA Asset
Management ($96.5 million corresponding to an equated
yield of 5.97%).
Foreign investors’ appetite are supported by an Australian
environment of low interest rates, and their interest in
Brisbane CBD comes as a result of a shift away from the
Sydney and Melbourne markets due to record low yields
and high capital values in these Southern cities
Domestic institutional investors remained active in the
market, with ‘Funds’ and ‘Trusts’ jointly accounting
for approximately 50% of all purchaser types. Notable
transactions include 30 Makerston Street acquired by
Sentinel Property Group ($103 million at an equated yield
of 7.52%), 201 Charlotte Street acquired by Sydney-based
Kyko Group ($126.7 million at an equated yield of 5.90%)
and Sydney-based Anton Capital is firming to be the new
owner of the contiguous office asset including both 239
George Street and 15 Adelaide Street by paying $226
million to Canadian investor Oxford Properties Group.
Reportedly, Oxford Properties Group also offloaded the
Australian Government Centre (140 Creek Street, 232
Adelaide & 295 Ann Street) to Ashe Morgan for $430
million.
Sales Activity by Price (> $5 million)
Vendor & Purchaser Type (> $5 million)
Brisbane CBD A Grade - Yield Range to 10yr Bond
0.0
2.0
4.0
6.0
8.0
10.0
12.0
10yr Bond Rate Market Yield - Average IRR - Avg

June 2019
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
2,000
4,000
6,000
8,000
10,000
12,000 Capital Value - BRI CBD Market Yield (RHS)
A Grade market yield in Brisbane CBD, as at June 2019,
are typically estimated to range from 5.25% to 5.75%. The
average A Grade yield for Brisbane CBD office buildings fell
65 basis points.
Average A Grade capital values were recorded at $10,000
per square metre reflecting a growth of 6.4% over the year
to June 2019. Investment focus of both domestic and
offshore investors will likely move away from the Southern
cities to the more affordable Brisbane CBD alternative, as
suggested by the significant difference in yields and capital
values between Brisbane CBD and Sydney CBD.
Other than the pickup of investors’ interest, a positive
tenancy outlook and rental growth forecasts will contribute
to the rising trend of capital values in Brisbane CBD in
2019.
Recent Notable Sales (by Sale Price)
Property Price ($m) | Date | NLA Yield | Type | $/sq m
80 Ann St (50%) 418.00 | Jul-18 | 60,000 5.00 | i | 13,933
61 Mary St 275.00 | Nov-18 | 28,741 5.95 | e | 9,568
239 George St & 15 Adelaide St 226.00 | May-19 | 35,671 n.a | n.a | 6,336
201 Charlotte St 126.70 | May-19 | 13,291 5.90 | e | 9,533
288 Edward St 113.42 | Feb-19 | 19,918 6.75 | e | 5,694
343 Albert St / 143 Turbot St 110.00 | Jul-18 | 19,873 6.77 | e | 5,535
30 Makerston St 103.00 | May-19 | 14,640 7.52 | e | 7,036
133 Mary St 96.50 | Mar-19 | 12,987 5.97 | e | 7,431
260 Queen St 95.25 | Jul-18 | 12,934 6.40 | e | 7,364
40 Tank St 93.00 | Aug-18 | 6,218 5.93 | e | 14,957
100 Edward St 64.00 | Jul-18 | 7,122 6.03 | e | 8,986
83-85 George St 60.00 | Oct-18 | 10,550 6.00 | r | 5,687
280 Elizabeth St 57.00 | Jun-19 | 10,600 5.58 | i | 5,377
179 North Quay 52.60 | Dec-18 | 8,525 6.55 | i | 6,170
293 Queen St 52.25 | Oct-18 | 5,257 5.75 | e | 9,939
95 North Quay 46.20 | Aug-18 | 8,416 7.66 | e | 5,490
60 Queen St 41.00 | Sep-18 | 3,144 7.45 | r | 13,041
110 Eagle St 35.25 | Jul-18 | 5,517 6.59 | e | 6,390
Capital Value ($/sq m) vs. Market Yield
Source: Savills Research; Yield Types: i = Initial, r = Reported, e = Equated, v = Vacant, dev = development

June 2019

Supply
After a period of low supply in the Brisbane CBD office
market across 2017 and 2018, developments due from
2019 will help aid in additional supply. The 48,000 square
metre development of 300 George Street and the 8,003
square metre development of Dexus’ 12 Creek Street
Annex are currently under construction and are due for
completion in 2019. Construction of Midtown Centre has
also commenced after Rio Tinto pre-committed close to
48% of the building for 10 years and is expected to be
completed by 2021. 80 Ann Street (which is due to be
completed in 2022) is also currently under construction,
noting Suncorp’s pre-commitment to approximately 66%
of the building for 10 years.
It is important to note that the adjoining chart reflects
developments that are still in the planning phase. Whilst
some developments have been given DAs by Brisbane
City Council, construction is subject to significant pre-
commitments.
Net Supply by Year (square metres)
(60,000)
(40,000)
(20,000)
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Historic Net Additions Savills Forecast
15yr Avg
Source: Savills Research / PCA
The table below details the major upcoming and planned development projects in the Brisbane CBD.
Building Address Dev Stage NLA Exp. Comp Precinct Tenants
320 George St DA 10,000 2019 Legal
12 Creek St (The Annex) UC 8,003 2019 Financial
300 George St UC 48,000 2019 Legal
163 Charlotte St (Midtown Centre) UC 42,000 2021 Government Rio Tinto
62 Mary St PS 38,000 2022 Government
80 Ann St UC 75,339 2022 Uptown Suncorp
150 Elizabeth St (Regent Tower) DA 48,000 2023 Retail
360-380 Queen St DA 50,000 2023 Financial
205 North Quay EP 50,000 2023 Legal

Development
Source: Savills Research; UC = Under Construction, EP = Early Planning, PS = Plans Submitted, PA = Plans Approved, DA = Development Approved

June 2019

Rents
Average A Grade net face rents ranged from $500 and $600
per square metre, with a 1.9% rental growth recorded over
the year to June 2019. The upward trend of development
activity in Brisbane CBD has been a key reason for stagnant
rental growth.
A recovery in rental growth is expected throughout 2019
after nearly five years of stagnant growth in Brisbane CBD.
Whilst growth in net face rents was not evident in the 12
months to June 2019, the strong demand from both public
and private sectors will likely drive up rental rates over the
next two years. With the continuing momentum of ‘Flight
to Quality’ among new tenants combined with a lack of
prime grade options in the CBD will likely push up rental
growth on an effective basis and tighten vacancy over the
next 2-3 years.

Outlook
A turnaround in Brisbane CBD is emerging, with an optimistic outlook throughout 2019 and beyond. The market is set to
experience a reversion after hitting the bottom of the cycle from a weak economy and falling mining investments over the
last 5 years. Savills Research expect a pickup in the State economy supported by a weak Australian dollar driving foreign
visitation and tourism spend, firmer commodity prices, significant public infrastructure investment and steady population
growth will boost various sectors of the economy and therefore investment sentiment.
The Brisbane sales market has witnessed a revived wave of capital enter from both domestic and foreign investors in search
of higher yielding assets and relatively more affordable investment alternatives. With a notable spread between Brisbane
CBD and Sydney CBD, current market conditions point to more room for tightening in Brisbane CBD.
Savills Research anticipates rental rates to edge upwards as vacancy rates drop to the lowest recorded level in five years
as a result of a combination of limited new supply and strong tenant demand. Capitalisation rates will be further tightened
as domestic and global players seek to take advantage of the yield arbitrage compared to Southern cities. The new land
tax changes are likely to negatively impact foreign buyers yet the degree of impact is unknown.
Net Effective Rents by Grade ($/sq m)
Net Face & Net Effective Rents as at Jun-19 ($/sq m)
-
100
200
300
400
500
600 Premium Grade A Grade B
690
540
430
395
295
200
0%
10%
20%
30%
40%
50%
60%
-
100
200
300
400
500
600
700
800
Premium Grade A Grade B
Net Face Rent Net Effective Rent Net Incentive % - rhs690
550
430
395
295
200
0%
10%
20%
30%
40%
50%
60%
-
100
200
300
400
500
600
700
800
Premium Grade A Grade B
Net Face Rent Net Effective Rent Net Incentive % - rhs

June 2019

Brisbane CBD Key Indicators (Q2-19)
Premium A Grade B Grade
Low High Low High Low High
Rental - Gross Face ($/sq m) 815 920 635 775 545 605
Rental - Net Face ($/sq m) 635 740 500 600 400 460
Incentive Level Net 30% 37% 32% 38% 38% 43%
Rental - Net Effective ($/sq m) 360 430 255 330 180 215
Outgoings - Operating ($/sq m) 95 120 85 95 70 85
Outgoings - Statutory ($/sq m) 65 75 60 80 55 80
Outgoings - Total ($/sq m) 160 195 145 175 125 165
Typical Lease Term 7 10 3 7 3 7
Yield - Market (% Net Face Rental) 5.00 5.75 5.25 5.75 6.00 7.50
IRR (%) 6.50 7.00 6.50 7.00 7.00 7.50
Cars Permanent Reserved ($/pcm) 600 850 500 650 450 550
Cars Permanent ($/pcm) 450 650 400 550 300 500
Office Capital Values ($/sq m) 12,250 14,500 8,500 11,500 5,500 8,000
Source: Savills Research NB: All rents equivalent to whole floor mid-rise

June 2019
Key State Office Contacts
Tracy Tam
+61 (0) 7 3002 8859
ttam@savills.com.au
Metro & Regional Sales
Gregory Woods
+61 (0) 7 3002 8825
gwoods@savills.com.au
Office Leasing
John McDonald
+61 (0) 7 3002 8847
jmcdonald@savills.com.au
Project Management
Ken Ng
+61 (0) 7 3018 6705
kng@savills.com.au
Valuations
Brett Schultz
+61 (0) 7 3002 8855
bschultz@savills.com.au
Asset Management
Phillip Dunn
+61 (0) 7 3002 8831
pdunn@savills.com.au
Capital Transactions
Peter Chapple
+61 (0) 7 3002 8858
pchapple@savills.com.au
Commercial Sales
Robert Dunne
+61 (0) 7 3002 8806
rdunne@savills.com.au
Savills is a leading global property service provider listed on the London Stock
Exchange. Trusted since 1855, we have extensive experience across the Asia Pacific,
with over 50 offices, and in Australia, we have over 800 staff focused on meeting all
your property needs.
Disclaimer
This comunciation has been prepared by Savills (Aust) Pty Ltd’s Research Team (“Savills”) for general information only and is not intended to
be relied upon in any way.
Information, projections and images
Information contained in this communication has been obtained from materials and sources believed to be reliable at the date of publication,
however Savills has not taken steps to verify or certify its accuracy or completeness. Opinions, projections and forecasts in this communication
depend on the accuracy of any information and assumptions on which they are based, and on prevailing market conditions, for which
Savills does not accept responsibility. No representations or warranties of any nature are given, intended or implied by Savills about this
communication, any information, opinions and forecasts contained within this communication or the accuracy or enforceability of any material
referred to in this communication.
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Capital Strategy & Research
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