The combination of weaker demand, new supply, backfill vacancy and sublease space has put pressure on pricing, particularly for existing A and B-Grade accommodation.
However, Queensland still holds the highest employer sentiment level of all states in Australia, which is good news for the office market.
According to the report, new A-Grade and B-Grade type stock incentives are currently in the order of 12-17 percent.
Matt Kearney, Director of Office Leasing at Colliers International, said that seven new A-Grade office buildings are all on schedule for completion in 2009.
Among those Brisbane projects being completed include 179 Turbot Street, NorthBridge, 275 George Street and 400 George Street.
“When these projects are completed our market will grow to be more than 2 million square metres of office space throughout the city – growth of more than 200,000 sqm,” said Mr Kearney.
Of the 200,000 sqm of new office space – approximately 75 percent is already pre-committed.
Helen Swanson, Commercial Research Manager at Colliers International, said Brisbane's net absorption (leasing) of office space is the weakest in five years, falling to 14,352 sqm.
“With limited vacancy and the deterioration of economic conditions and business confidence – it was not surprising that net absorption for Brisbane CBD office for the twelve month period to January 2009, fell below the 10-year historical average of 35,000 sqm,” she said.
“On a more positive note, the global financial crisis has significantly thinned out the expected supply pipeline. There is only one major project to be delivered in 2010 and only two committed thereafter. Vacancy rates are anticipated to rise sooner rather than later but Brisbane’s office market will eventually recover and with population growth expected, will continue to be a thriving commercial hub.”
On the sales side, Mr Kearney said that private investors were active – taking advantage of reduced competition in the market.
The research shows there were 10 $20 million-plus office deals within the CBD for a total $667 million last year including the sale of Stockland Group's 300 Ann Street office tower in December for $38 Million.
“Nine of these buyers were private investors – most institutional buyers are on the sideline waiting for a recovery,” said Mr Kearney.