Knight Frank reports strong CBD office rental growth across Eastern Seaboard cities

Knight Frank’s latest research reveals significant growth in prime office rents across Australia’s Eastern Seaboard CBD markets in Q2 2024, with Brisbane leading the pack.

Key findings:

1. Brisbane CBD saw the highest quarterly increase in net face prime office rents at 3.6%, followed by Melbourne (2.3%) and Sydney (2.1%).
2. Brisbane’s annual prime rental growth reached 8.1%, the fastest since 2008. Effective rents grew even more rapidly at 15.1% year-on-year due to declining incentives.
3. Sydney and Melbourne saw annual prime rental growth of 4.6% and 2.4% respectively.
4. Despite overall market sluggishness and elevated vacancy rates, demand for high-quality office space remains strong.

Ben Burston, Knight Frank’s Chief Economist, attributes this growth to businesses seeking higher-grade options that appeal to staff and align with ESG requirements. He notes that Brisbane’s rapid rent escalation is driven by growing demand, high construction costs, and limited availability of premium space.

Andrea Roberts, Knight Frank’s National Head of Leasing, highlights that the 2023-24 financial year saw solid demand for well-located, amenity-rich office spaces near key public transport. She expects this trend to continue, particularly given the scarcity of new office developments due to higher construction and financing costs.

Roberts also anticipates that the opening of the Sydney Metro in August will boost demand in City Fringe and Lower North Shore markets by improving accessibility.

The report underscores the resilience of prime office markets in Australia’s major cities, despite broader economic challenges and changes in work patterns post-pandemic.