16/01/2015 - 14:43

Commercial rents fall, vacancies up

16/01/2015 - 14:43

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Commercial rents in the Perth CBD have been tipped to fall by 9.4 per cent over the next 12 months, with the Western Australian capital one of only two major Australian cities to experience a contraction in office rental values.

Commercial rents fall, vacancies up
GOING DOWN: CBD office landlords are facing a correction in net face rents in 2015. Photo: Attila Csaszar.

Commercial rents in the Perth CBD have been tipped to fall by 9.4 per cent over the next 12 months, with the Western Australian capital one of only two major Australian cities to experience a contraction in office rental values.

Commercial agency Colliers International has made the forecast after a 20 per cent-plus fall in rental growth rates in 2013-14.

Brisbane was the only other city where commercial rents were predicted to fall, at a much more meagre rate of 1 per cent.

Sydney was forecast to be the nation’s best-performing capital city, with office rents expected to rise by 7.7 per cent in 2015.

Colliers said it expected A-grade net face rents in Perth to fall to an average of $645 per square metre, down from the current level of $665/sqm.

Incentives to rent A-grade office space are expected to continue to rise, hitting 30 per cent in 12 months’ time, up from the current level of 25 per cent.

The Property Council of Australia is due to update its office vacancy rate early next month, but its last report showed 11.8 per cent of the Perth CBD’s office space was empty.

Colliers’ research showed overall vacancy had increased by 45,000sqm after that report was released in August 2014, taking the current proportion of empty offices to 14 per cent of the total stock.

That vacancy rate is more than 180 per cent higher than the 4.2 per cent recorded at the same time in 2013.

The sobering statistics come at a time of falling confidence in the sector, according to an ANZ/Property Council of Australia survey released last week.

Property Council WA executive director Joe Lenzo said confidence in the commercial sector had been decreasing steadily since June 2013.

“The WA property sector is still adjusting after record high levels of business confidence within the past two years, when the resources sector was at peak performance along with population growth,” he said.

Despite the gloomy prediction for 2015, Colliers International director of office leasing Neil Kidd expects the vacancy rate to fall rapidly after peaking in 2016.

“The economy shows positive signs of transitioning from the resources boom to a more diverse and stable growth phase, and while resources capital expenditure is tapering, the pipeline of projects remains solid,” Mr Kidd said.

“So the fundamentals are in place for the return of a stronger office leasing market.”

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