The office vacancy rate in Perth’s central business district has jumped sharply higher to 10.8 per cent, research by Jones Lang LaSalle has found.
The office vacancy rate in Perth’s central business district has jumped sharply higher to 10.8 per cent, research by Jones Lang LaSalle has found.
The weakness in the Perth market was highlighted by the negative net absorption of -84,400 square metres over the course of 2013.
This was a result of many businesses reducing their demand for office space, at a time when there was a small increase in supply.
JLL also found that many businesses in Perth are still looking to sub-lease surplus space.
Sub-lease availability in Perth was 4.89 per cent of stock, significantly higher than in other capital city markets. The national figure was just 2.05 per cent.
The Perth CBD vacancy rate calculated by JLL is up from 7.9 per cent in June 2013 and 9.4 per cent in September.
The JLL data compares with the 6.9 per cent figure reported by the Property Council for July 2013. (JLL and the Property Council use different methodologies so their figures are not directly comparable.)
The latest Perth figure remains slightly lower than the national CBD vacancy rate of 11.8 per cent.
JLL said the Sydney market (10.5 per cent) actually tightened over the December quarter while the Brisbane market was the country’s weakest, with a vacancy rate of 15.4 per cent.
Net absorption in Brisbane was -105,800sqm.
JLL WA managing director John Williams said the resource sector was focused on cost reduction in 2013, which resulted in delays to new projects.
“It is likely the contraction by the mining industry in 2013 has now played out,” he said.
Mr Williams added that, with a recalibration in the costs base and commodity pricing remaining stable, those projects that were delayed could now be reconsidered.
“Whilst we don’t anticipate dramatic levels of absorption in the first part of 2014 it is likely activity will gradually increase during the year,” he said.
The supply of new stock in the Perth CBD in 2014 is expected to be modest, with developments at 32 St Georges Terrace and 863 Hay Street due to add nearly 30,000sqm to the market.
Supply will jump substantially in 2015 as projects such as Mirvac’s Justice Tower, Brookfield Place stage 2, and four new buildings under construction at Leighton Properties’ Kings Square development are completed.
Beyond that, plans by Chevron and BGC to build major new office towers at Elizabeth Quay and the eastern end of the city respectively will add further to supply.
Commenting on the national figures, JLL’s Head of Office Leasing, NSW & Australia, Tim O’Connor said “it is too simplistic to say the leasing market was challenging in 2013”.
“The sub-500sqm cohort of the market was active, while a number of large pre-commitments were finalised,” Mr O’Connor said.
“Furthermore, we noted a divergence between prime and secondary vacancy rates in 2013 – a number of occupiers capitalised on the availability of good quality office accommodation to relocate to better premises.”
