A lack of office space has the potential to severely impact upon the growth of the Perth City in the next three years, according to the Property Council of Australia.
A lack of office space has the potential to severely impact upon the growth of the Perth City in the next three years according to the Property Council of Australia.
"Perth's lack of office space has now reached a critical level," said Property Council Executive Director, Mr Joe Lenzo.
"In the past 6 months, more office space has been removed from the Perth market than was added through new construction. Every other Australian capital city has seen significant additions to stock in the first half of 2006. Perth is now part of the world economy and if large amounts of contiguous space are available in Sydney, Melbourne or even Singapore, then the global resource companies that underpin our market could move project space there, to the detriment of the Western Australian economy," said Mr Lenzo.
Only Cape Bouvard's fully precommitted 7,799sq m Allendale II project was added to the market while over 33,806sq m was withdrawn as owners of lower quality office space commenced refurbishments to upgrade their buildings, to meet the requirements of modern companies.
Continued strong demand for office space dropped the vacancy rate down from 5.8% to 3.5% in the six months to the 1st of July 2006, which is the lowest ever recorded in the Perth CBD.
Although a number of significant leasing deals were transacted in the first half of 2006, there was only 5,322 sq m of net absorption in the Perth market.
"Resources companies continue to underpin the demand for office space in Western Australia with Rio Tinto, Woodside, Worley Parsons and Gull Petroleum all taking additional high quality space in the past six months. The State and Federal Governments were also active in the marketplace, with the Water Corporation and the Department of Health taking up space in the Perth CBD," said Mr Lenzo.
Other active sectors in the market were insurance (Western QBE), legal (Talbot Oliver Lawyers), finance (AMP) and property (Golden Group).
With only 293 sq m of Premium space vacant and a lack of available A Grade stock, B Grade recorded the biggest vacancy drop, halving down to 5.1% (or a total of 14,442 sq m vacant) as tenants looking for space were forced to take what was available.
The vacancy rate in Perth's other main commercial office market, West Perth, crept to a record low of 3.1%, down 0.6 percentage points from January's record low vacancy rate of 3.7%.
Net absorption in the six months to July 2006 was strong, at 2,263sq m, but limited by the amount of space available for rent.
Despite a number of major projects being offered to the market, no major new office developments have been given the green light, with tenants and financiers slow to pre commit.
"With only 15,070sq m of refurbished space due to re-enter the Perth CBD market in the next two years and rents reaching record highs, surely the time to start building some of the 100,000sq m of new stock planned, is today," said Mr Lenzo.