Businesses are increasingly pushing out into Brisbane's urban renewal areas in the search for office space – with suburbs like Fortitude Valley, Bowen Hills and New Farm experiencing significant demand.

Queensland research manager at Colliers International, Helen Swanson, said the Urban Renewal Area has recorded the strongest net absorption figure of all fringe office precincts, as at January 2009. Colliers found net absorption had averaged 66,052sqm in the past year.

"The mining, engineering and construction sector contributed largely to the take up of office space during 2008, but given current economic conditions along with falling base metal prices it is likely that demand from this sector is likely to diminish over the coming months," said Ms Swanson.

Vacancy rates for urban renewal office space are 6.4 percent, which translates to about 19,190sqm, said Ms Swanson. The market was made up of 297,634sqm of space.

"The urban renewal area's momentum is strong right now and it has reactivated the next wave of development," she said. According to Colliers International Research, there is 52,846sqm of new A-grade office space anticipated for a 2009 release in the Urban Renewal Precinct of which abput 66 percent is currently pre-committed.

Warwick Wolfe, state director of Office Leasing at Colliers International, said commercial properties within the Brisbane Urban Renewal area have become more readily available.

"The recent completion of Green Square would have accounted for the majority of the deals throughout 2008," he said. "We have also seen large commitments to the new HQ development from Maunsell Aecom 15,000sqm , Leighton 10,000sqm and Technology One 8000sqm."

"Over all the future of office development in the urban renewal precinct is very good once demand returns to the market. The urban renewal precinct is gathering an ever-growing level of acceptance from mainstream corporate tenants who employ a high proportion of Gen X and Gen Y. This has been proven over the past two years by the substantial number of tenants choosing to relocate to the Valley as its profile improves.

"When compared to other traditional commercial office precincts within the inner city fringe such as Milton , South Brisbane  and Spring Hill, the urban renewal precinct certainly provides the greatest possibilities for future office development as identified by the number of development applications received  by the urban renewal precinct in recent times," he said.

Ms Swanson said a commercial property in Newstead had been snapped up last month.

Cromwell Group purchased FKP Property Group's Energex building in February this year for $173million.  The office and retail asset situated at 33 Breakfast Creek Road, Newstead which is due for completion late next year has a 93 percent pre-commitment by Queensland Government owned corporation Energex.

HQ Project, Fortitude Valley (artist's impression)

"There is also a further 22,800sqm of potential A and B-grade backfill space expected to enter the market in 2009," Ms Swanson said.

Ms Swanson said conditions are having a flow-on effect into the rental market with gross face rents of up to $550/sqm being achieved in the Urban Renewal area.

"Gross face rents for office space in existing buildings in the Urban Renewal area are achieving between $360/sqm and $500/sqm with rental incentives currently positioned at 10-15 percent," she said.

"New A-grade gross face rents in the Urban Renewal area are currently sitting between $450/sqm and $550/sqm with incentive levels at 15-20 percent."

www.colliers.com

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