12/12/2007 - 22:00

Commercial tinge to building spree in East Perth

12/12/2007 - 22:00

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Commercial tinge to building spree in East Perth

Take a drive down Adelaide Terrace and it’s hard to miss the changes taking place.

A succession of construction sites herald the significant alteration to the fabric of the area that will occur within two years, adding to a handful of new apartment complexes that have recently been completed, mainly on the riverfront.

Cranes crisscross the skyline in East Perth from Hay Street to Terrace Road, clustered mainly in between Victoria Avenue in the west and just east of Bennett Street – with Adelaide Terrace increasingly the focus of activity.

It’s an extraordinary sight for an area that has been neglected for years.

A simple survey reveals a conservative estimate of more than $500 million in new construction already taking place, with 1,500 apartments in progress under a host of exotic, feelgood promotional names.

It seems Adelaide Terrace and its neighbouring streets have been in vogue for residential projects because of the relative lack of height restrictions, river glimpes, and proximity to the central business district, which attracts high-end consumers, or at least the developers targeting them.

But these benefits are also attractive to the commercial property market, and there is mounting evidence that East Perth’s building spree is likely to be maintained to some degree by office towers rather than the pure residential emphasis we’ve seen for the past five years.

The most active developer in the area, South Perth-based Finbar Group Ltd, managed by John Chan, surprised many in the market by signalling a potential shift in direction on its $80 million redevelopment plans for former Fairlanes 10-pin bowling centre.

Just three weeks ago, WA Business News revealed that Finbar had proposed scrapping its plans for a 192-apartment residential tower in favour of a 14-storey office building.

At 17,510 square metres, the office planned would be the biggest of the known new commercial buildings for the area.

Finbar, which has more than 800 apartments just completed, in progress or planned for the area, baulked at any suggestion the residential market was overdone.

Instead, it claimed that CBD prices were pushing up values in East Perth and simply changing the equation back to office accommodation.

It seems Finbar isn’t alone on this.

While Stockland was an early starter with its $34.5 million office across the road from the Family Court, another new development, next to the former RAC building in Adelaide Terrace, has pushed the new commercial space coming on stream to almost 40,000sqm of new office space.

Queensland-based First State Development is understood to have purchased the site at 226 Adelaide Terrace for between $12 million and $14 million from Mimi Wong’s The Golden Group.

It is believed First State plans a 13,000sqm office development with floor plates at around 2,000sqm, reflecting demand from business for large spaces.

And it seems there’s more to come.

CB Richard Ellis senior director of office leasing, Andrew Denny, said there had been a shift at the margins in East Perth from residential to commercial.

“That has only happened in the last three to four months,” he said.

With rents hitting $800/sqm or more in the CBD, and predicted to keep marching towards $1,000/sqm, Adelaide Terrace’s distance from the city’s key amenities is becoming perceptibly reduced in the minds of lessees.

While price rises are clearly making suburban locations more attractive too, East Perth has got proximity to the transport hubs, shopping and some key sectors such as the law courts to attract those who can no longer meet the downtown rates.

It also has a track record of allowing big developments, with several of the new construction project topping 20 storeys – a height that would cause palpitations in many suburban council chambers.

With new commercial projects still rare and unproven, the jury is out on whether business of any particular flavour will seek out the area, commonly populated by legal offices and engineers at the moment.

Andrew Forrest’s Fortescue Metals Group Ltd rocked the boat recently when it shifted from the mining cluster of West Perth to take up residence in the Hyatt Centre near the eastern extremity of Adelaide Terrace, in a move everyone simply regarded as a very good deal.

Equally, though, Michael Malone’s iiNet Ltd is shifting out of its Adelaide Terrace headquarters to the far more hip Subiaco.

“We have not seen any tenants move into Adelaide Terrace because there have not been any new buildings there,” Mr Denny said.

“It will be interesting to see who does.”

Of course, the East Perth costs have moved in line with the CBD rates, so it’s no longer the bargain it might have been just two or so years ago.

Knight Frank director office leasing, Greg Thurston, said rents had doubled from around $200/sqm two years ago to $400/sqm currently.

Mr Thurston believes the current wave of construction will give Adelaide Terrace a different feel from the rest of Perth.

“It is going to be a similar version to St Kilda Road [Melbourne] with a mix of office commercial and good quality residential,” Mr Thurston said.

“Hopefully the council will have some plans to beautify Adelaide Terrace.”

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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