Commercial real estate agency Colliers International has tipped a wave of refurbishments or conversions in Perth’s office market, as landlords in older buildings look to deal with a rising vacancy rate.
Colliers’ latest CBD Office Research and Forecast Report showed the Perth office vacancy rate was 14 per cent in July 2014, slightly more than the 12 per cent vacancy rate measured by the Property Council of Australia earlier this month.
More than 190,000 square metres of office space is set to be added to the CBD in the next 18 months, leading Colliers to predict the vacancy rate to rise to 18 per cent by January 2016.
Colliers International director of office leasing Neil Kidd said there would likely be a flight to quality by tenants occupying B-grade buildings, with better deals and more cost effective options available elsewhere.
“We’re seeing an unusually mobile market for tenants right not, and what that tells me is that if you’re a B-grade owner you need to think about how you’re going to retain your tenants,” he said.
“The way to do that is not to just reduce rents, it’s to improve the amenity of the building.
“There is an opportunity for a B-grade owner to take stock of what they’ve got, and improve themselves.”
Buildings already slated for refurbishment include 99 St Georges Terrace, 172 St Georges Terrace and 256 Adelaide Terrace.
“That lower end range of stock, if they’ve got reasonable quality floor plates, could also potentially see some conversions come through if the numbers add up to a cost effective conversion to residential, hotel or even strata,” Mr Kidd said.
“That’s something we’ve seen happening in the Sydney and Melbourne markets, so it will be interesting to see whether we start to witness that emerge here.”
