Brisbane's Fringe office vacancy rate recorded its highest level since January 2003, rising from 11.4 percent in January to 12.2 percent in July this year, according to the Property Council of Australia's mid-year Office Market Report released today.

Property Council of Australia Queensland Executive Director Steve Greenwood said overall demand was healthy over the last six months with net absorption levelling at 45,262sqm.

"The increase in the vacancy rate was driven by significant additional supply of A Grade space totalling 61,298sqm. It was always going to be difficult for the fringe market to absorb such a significant increase in supply over the first half of 2010," Mr Greenwood said.

According to him, "This supply spike is more than three times the 15-year average for the Fringe market."

"Importantly, supply will come back closer to average over the next six months with 34,935sqm due to enter the market.

"Almost 90 percent of the additional supply expected in the second half of 2010 is pre-committed.

Mr Greenwood said A, B and C Grade vacancies edged up by 0.9 per cent, 0.4 per cent and 2 per cent, respectively over the period.

D Grade declined from 1.0 per cent to 0.5 per cent, although the D Grade market is small and prone to vacancy fluctuation.

"We are likely to see strong demand in this market over the next 12 to 18 months which, when combined with a softening of supply, should lead to a stabilisation and gradual reduction from this seven year vacancy high," he said.