Commercial leasing, sales markets strong

BUOYED by Western Australia’s thriving economy, the commercial property market performed better than expected in 2004.

The sales market was dominated by off-market sales, and commentators agree there was not enough supply to meet demand.

The leasing market recovered from a tough period with 2004 representing the first time net absorption has occurred in WA.

Vacancy rates are expected to continue diminishing, taking with them WA’s title of the State with the highest vacancy rates.

Colliers research manager David Cresp said mining and government tenants had driven the leasing market.

“It has been a very active year for leasing; we have seen the strongest net absorption for some time, and the strong economy and mining boom are really driving growth,” he said.

“BHP has taken up several separate spaces amounting to more than 15,000 square metres.

“We are now seeing a very strong demand come through which looks good for the next few years, and will see incentives and rents go down.

“There has also been a lot of consolidation by listed property trusts, which has resulted in lots of activity in the Perth sales market, but it is a tightly held market and is in very high demand.”

Mr Cresp told WA Business News the property industry had expected 2004 to be a good year, but that the level of demand had been the greatest surprise.

CB Richard Ellis research manager Andrew Woodley-Page said the strong economy had boosted the property market over the past year.

He said the sales market was tight due to a lack of stock.

“For example, the total of transfers of major retail stock valued at over $5 million was well over $500 million, but very few of these transactions were on market and most were related party deals,” Mr Woodley-Page said.

“For leasing, 1 Adelaide Terrace looked like being a potential problem at the start of the year, but that is almost full now, and both resource firms and the State Government have driven the take-up of space.

“There has also been a lot of organic growth from tenants.”

Knight Frank State director of Asset Services Ian Edwards agreed that the market had performed better than expected, and said a lot of deals couldn’t happen because of the “feeding frenzy” occurring on current stock.

“The next big tenant that moves to Perth is going to have a problem because there are no chunks of A-grade stock left,” Mr Edwards told WA Business News.