CBD office market on edge

NEW office developments and demand from the mining sector will result in a finely balanced year for Perth’s CBD office market, according to the latest research from analysts CB Richard Ellis.

CBRE’s latest Perth Marketview report indicated improved economic conditions were boosting demand, but a large amount of supply coming onto market was likely to affect vacancy rates. Senior director Andrew Denny said about 100,000 square metres of new stock was set to become available during 2010.

“This will have a knock-on effect on vacancy rates in the short term,” Mr Denny said.

“Net absorption is expected to rebound in 2010, underpinned by increased tenant demand, however this may not be sufficient to account for the total amount of new stock that is expected to come to the market this year.”

In terms of investment, CBRE associate director Andrew Woodley-Paige said buyer demand continued to be strong, particularly from private investors and syndicates, while unlisted funds and Australian real estate investment trusts were returning to the market.

“Yields and investment markets appear to be stabilising with a return of confidence leading to an increase in sales volume, with Perth’s indicative prime CBD yield remaining stable at 8.2 per cent as at March 2010,” Mr Woodley-Paige said.

“Institutional buyers have recapitalised and are re-entering the investment market for specific assets. Similarly, overseas investor interest in Perth has never been stronger, with European and Asian investors making acquisitions in Perth in the recent 12 months.

“The sale of a 50 per cent interest in the Alluvion office development to the Commonwealth Property Fund in November 2009 ... indicates buyers for high-value assets are beginning to come back into acquisition mode once again.”