CBD vacancy squeeze

Growth in the Western Australian residential property sector over the past year may not have reached the stellar heights of the 2004-06 period, but a double-digit return still points to the market’s continuing strength.

Based on the preliminary June quarter median house price of $460,000 according to the Real Estate Institute of WA, the value of Perth’s housing market has increased nearly 12 per cent over the year to June 2007.

The June median was 3.2 per cent below the $465,000 median reached in the March quarter, a market correction skewed by the emergence of more first homebuyers buying cheaper homes.

Cheap property in Perth’s commercial office sector has become an even rarer commodity over the past year with prime rents approaching $600 per square metre off the back of the lowest CBD office vacancy rate in 25 years of 0.7 per cent.

With the vacancy situation across all grades reaching crisis point – with less than 9,000sq m overall and little relief expected until 2009 – the value of Perth office stock has skyrocketed due to the potential for lucrative rental reversions. 

Savills Research has revealed there were about $835 million worth of office property transactions (above $1 million) in the year to June 2007, up 102 per cent on the $416 million recorded in the previous year, and well up on the three-year average of $530 million.

While local investors and syndicates have kept the lower end of the commercial market ticking over, institutional investors have had rich pickings of Perth’s prime office buildings.

GE Real Estate was the most prolific investor in Perth property over the 2006-07 financial year and the player to make the largest acquisition in the period, snaring Allendale Square and Allendale II (now Alinta Plaza) from Cape Bouvard Investments for $203 million off-market.

The $154 million sale price of Allendale Square (pictured) was just ahead of the second biggest deal of the year, the $153.5 million achieved on an AMP inter-company transfer of 140 St Georges Terrace.
And the big deals continued in the new year, when Stockland Ltd secured a 50 per cent stake in the BankWest tower for $139 million in January.

Major finance and resources companies have also given the green light to construction of some 245,500sq m of new office space in Perth, spearheaded by BankWest with its 42,500sq m pre-commitment at Raine Square in September 2006.

This was followed by KPMG and Macquarie Bank (10,688sq m in total) at Bishops See stage one, and Inpex Ltd at Century City (7,000sq m).

Perth’s industrial market, meanwhile, has demonstrated in dramatic fashion the phenomenal growth of industry in WA.

The value of industrial land has more than doubled in some areas during the past 18 months while rents in core and secondary markets over the year to March 2007 increased by 36.7 per cent and 47.6 per cent, respectively.