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      Commercial Real Estate – Fortitude Valley

      The commercial real estate and office rental market in Fortitude Valley

      Fortitude Valley – or simply ‘The Valley’ as it affectionately called by the locals, sits on the North East border of Brisbane’s CBD. Together with neighbouring Bowen Hills and Newstead, the Fortitude Valley area is referred to by the real estate industry as the “Urban Renewal” precinct. 

      Fortitude Valley has a colourful reputation as music venue and nightclub hot spot akin to Sydney’s Kings Cross or Melbourne’s St Kilda. However The Valley is more than just a place to party. From the early 1990s the Brisbane City Council’s policy of urban renewal has helped transform Fortitude Valley into a booming commercial hub as well as a coveted residential address.[1]

      The Urban Renewal area’s commercial real estate market took off in the 2000s on a tide of investment stemming from Queensland’s mining boom. According to JLL, Brisbane’s non CBD office markets have nearly doubled in size over the past 10 years (from 691,000 sqm in 2004 to 1.274m sqm in 2014) with most of the action taking place in The Valley.[2]

      The migration of high profile tenants into Fortitude Valley was driven initially by a dearth of space in the CBD. Development in The Valley has trended towards an expansive ‘campus style’ model – similar to that found in Melbourne’s Docklands or Sydney’s North Ryde. This appealed greatly to tenants looking for spacious layouts that were difficult to find in Brisbane’s centre.[3]

      At the same time Fortitude Valley’s emergence as a ‘hipster’ destination with a buzzing night club, dining and retail scene strengthened the suburb’s appeal with prospective tenants. The location came to be viewed as a drawcard for younger, skilled, upwardly mobile workers. The Valley’s proximity to the CBD and great transport infrastructure no doubt also contributed to its rising profile[4].

      Whilst the end of the mining boom has impacted demand for office space in Brisbane, the Fortitude Valley commercial real estate market has been very active over the past 12 months. M3 Property Strategists have noticed a definite recentralization trend. Improved affordability in the CBD has lured a number of firms from the Urban Renewal precinct and other fringe markets. This has been counter balanced by outer suburban firms moving in to the district. One such example is telecommunications contractors Vita Group who have recently relocated to Bowen Hills from Albion.[5]

      With a high proportion of A-Grade stock, the area has benefitted from a ‘flight to quality’. [6]Despite the challenging environment, headline vacancies dropped over the first half of 2015 from 14.3% to 12.4% - significantly lower than the Brisbane CBD at 15% [7].

      According to Colliers, significant tenant demand in the Urban Renewal precinct is coming from smaller occupiers (sub 500 sqm) as a result of corporate downsizing. There has however, been some larger transactions bucking the trend – specifically leasing deals with Lend Lease, Robert Bird, Konica Minolta and the QLD Government.[8]

      M3 report that despite downward pressure in the Brisbane market as a whole rents in the Urban Renewal precinct have stayed firm. Nevertheless incentives have crept up reflecting the tenants’ increased bargaining power. As at July 2015 Prime Gross Face rents sat between $525 and $600m per square meter per annum with incentives averaging 35%.[9]

      Businesses considering renting an office in Fortitude Valley should act quickly in order to snare a favourable deal. New supply is limited whilst the residential conversion trend continues to remove stock from the market. Vacancies will only tighten as confidence returns to the Queensland economy and the balance of power will start to swing back towards the land lord.

      [1] Wikipedia
      [2] JLL, The Evolution of Brisbane’s Non CBD Office Market, P3
      [3] JLL, The Evolution of Brisbane’s Non CBD Office Market, P13  
      [4] [4] JLL, The Evolution of Brisbane’s Non CBD Office Market, P13  
      [5] M3 Property Strategists, Comm3ntary – Spring 2015, Brisbane Fringe Office Market, P2
      [6] Colliers – Metro Office, Second Half 2015 – Metro Migration, P24    
      [7] Property Council of Australia, 2015 Office Market Insight, Brisbane CBD
      [8] Colliers – Metro Office, Second Half 2015 – Metro Migration, P25
      [9] M3 Property Strategists, Comm3ntary – Spring 2015, Brisbane Fringe Office Market, P6  
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