Insights

Aegis Quarterly Market Update

 Office leasing is becoming increasingly expensive. Vacancy rates have dropped significantly from 25% at the height of COVID in 2019 to just 12%. This figure is expected to tighten further over the next three years until new supply enters the market.

The two significant factors contributing to the delay in new supply is a) a shortage of builders who want commercial tower projects, and b) the cost of materials  & labour to then build them. Both of these factors are now causing new build office towers to have gross face rents in the order of $1,000/sqm to make the projects viable which is a significant increase from only just two years ago.

Market Trends and Forecast

 The 2024 financial year has been positive, but the market is undeniably slowing down. Vacancy rates have tightened significantly since the start of the year, and with no new supply expected until 2027, this trend is likely to continue, pushing rents higher and higher.

However, there is an increasing challenge in filling vacancies and moving tenants. Fit-out costs are also at an all-time high, making it difficult to offer attractive leasing packages, particularly to SMEs, which employ over 67% of Queensland's private workforce. So whilst the market has tightened and rents have undeniably increased, tenants are generally happy to stay put and renew their lease for additional terms.

To put all of this into perspective, there are now only five genuine opportunities in the inner fringe for tenancies over 3,000 sqm which is far improvement from ~2019 when there was a total of ~250,000sqm of space available.

For more information on commercial leases, or for help negotiating a security, contact the experts at Aegis Property Group.