The office vacancy rate in Perth’s CBD has reached another record low, falling from 0.7 per cent to 0.5 per cent in January, West Perth has reached a highly improbable milestone – the area is statistically full.
The office vacancy rate in Perth’s CBD has reached another record low, falling from 0.7 per cent to 0.5 per cent in January, whileWest Perth has reached a highly improbable milestone – the area is statistically full.
The latest figures from the Property Council of WA show that just 104 square metres of D-grade space remains in West Perth, bringing the official vacancy rate to 0 per cent for the first time in 25 years of reporting.
The CBD’s vacancy rate of 0.5 per cent, down from 0.9 per cent this time last year, was the lowest of any capital city in Australia.
Net absorption in the CBD was 3,636sqm in the last half of 2007, and was more than triple that amount in West Perth (11,377sqm), where supply was boosted by Pivot Group’s 18-32 Parliament Place and TRG Properties’ Ord Street developments.
Both of these projects were fully pre-committed, which fits the broader trend for new stock.
According to the Property Council, almost three-quarters of the 145,658sqm of CBD space due to come on line during the next two years is pre-committed, affording tenants savings of up to 50 per cent in rent in some cases.
In West Perth, a modest 4,950sqm of space will come on to the market in 2008, while 60 per cent of the 16,380sqm due next year has been pre-committed.
Property Council of Australia WA executive director Joe Lenzo said the CBD was effectively a full house.
“If tenants haven’t pre-committed or don’t pre-commit now, they’re going to miss out,” he said.
Mr Lenzo said a combination of pent-up demand and economic growth would ensure that vacancy rates were unlikely to recede very far in the next few years, despite extra stock being built.
“Even with the new offices in the city, the days of 14 per cent vacancy rates are not likely in the foreseeable future. It seems a realistic rate would be six to 8 per cent, but this is a good thing, because it provides opportunities and choice,” he said.
Property analysts agree the situation is unlikely to improve for tenants in the short term, given that no new office space is scheduled for completion in the CBD before the end of the year.
Colliers International (WA) office leasing director Ian Campbell said there would be no respite for tenants over the next 12 months, with rents for premium and A-grade stock likely to rise from their current levels of about $800/sqm.
“I think we’ll see another 25 to 30 per cent growth in rents this year. We’ll be at $1,000/sqm in 2008,” he said.
Mr Campbell said he also expected some movement to suburban areas during the next 12 to 18 months.
“We’re seeing the opportunity in the suburbs to build more space, and this will have a shorter delivery time than the city,” he said.
“The city won’t start to experience any significant increase in supply until 2011 or 2012, and there’s a lot of water to go under the bridge before then, from an economic point of view.”
CB Richard Ellis senior director of office leasing, Andrew Denny, said tenants that had not pre-committed to new stock were expected to absorb vacated space from next year.
“2009 will create opportunities for tenants in some buildings to take up more space,” he said.
“It’s certainly true that tenants who have pre-committed to new buildings have done very well.
“Rents in new buildings are less than current market rents. Whether that will be the case in 2009-10 remains to be seen.”