Future-proofing Perth's CBD

Perth’s high vacancy rates are broadly seen as a negative for the city, with the percentage of empty office space across the CBD frequently topping the national figures.

However, where some see a problem, others recognise an opportunity.

Modifying existing office buildings for alternative uses is one idea currently in play.

The CBD office vacancy rate is between 22.5 and 23.5 per cent, according to Y Research principal Damian Stone, who says older stock is the largest issue facing the city, with more than 60 per cent of office buildings classed as C-grade properties.

“These buildings are typically smaller properties, older than 15 years, located in secondary locations,” Mr Stone told Business News.

“In previous periods of high vacancies, significant stock was withdrawn for conversion or demolition; The Duxton Hotel was a former office building, as was the former Rydges Hotel (now the Intercontinental Perth City Centre).

“And a number of older buildings along Adelaide Terrace and Terrace Road have made way for apartment buildings.”

One rejuvenation project currently under way is at the former Telstra building in Northbridge, which is being converted into student accommodation.

The City of Perth has embraced this line of thinking, commissioning a C-grade office case study to advance projects of this kind. 

Since the release of the study in August, City of Perth chief executive Martin Mileham said a workshop with landowners and property managers in the city’s east end had been held, as well as one-on-one briefings and a range of industry presentations.

“While the city has little control over the macro economic trends that trigger a rise in vacancy, the ‘do nothing’ approach was seen as a net economic loss for Perth,” Mr Mileham told Business News.

“Office vacancy rates are a significant issue for the property industry and have flow-on impacts on the number of people visiting the city, and the performance of retail and food and beverage sectors.

“Adaptive re-use has many broader benefits to the city, including extending the life-cycle of building stock, improving environmental performance and providing fit-for-purpose space for growing sectors of Perth’s local economy.”  

Six concept schemes have been developed for potential re-use: vertical education facilities; residential apartments; upgrades to A-grade offices; mixed-use (eg. supermarket with residential); co-working spaces; health and wellbeing hubs; and student accommodation.

An impression for conversion of a C-grade space into a health hub.

Mr Mileham said the schemes had yet to result in a new project, but he had received anecdotal feedback that the health and wellbeing concept was being investigated further.

The council will also soon launch its ‘Serious Business Moves’ awareness campaign to encourage organisations to establish themselves in the city, with specific details yet to be revealed.

“With 280 office buildings in the central city, and over 200 C- and D-grade buildings, the study was scoped to ensure relevance to these lower-grade buildings and the highest number of property owners,” Mr Mileham said.

“This was achieved through the ‘hypothetical’ nature of the concepts, which ultimately provided a preliminary, comprehensive due diligence to kick-start investigations.”

Cameron Chisholm Nicol managing director Dominic Snellgrove and his team were selected to lead the collaborative design process to generate the schemes with Y Research, Wood & Grieve Engineers, BSM Consulting and a team from the City of Perth.

“Far from being doom and gloom, C-grade office buildings offer a unique opportunity to provide a range of innovative and diverse uses in the post-boom era,” Mr Snellgrove told Business News.

“Successful, vibrant and sustainable cities rely on diversity and activity, not single use and vacant space.

“Adaptation and re-use rather than demolition has the capacity to deliver economic, social and environmental returns.”

An impression for converstion into a mixed-use concept.

Mr Snellgrove said the structure of most C-grade stock was quite robust in its dimensional characteristics, structural capacity and ability to deliver alternative uses.

“The structure may need additional work to comply with current codes, however, it usually facilitates consideration of additional levels as well as the removal of portions of floor plate to connect different floor levels,” he said.

“Connecting floor plates in this way opens up a broad range of possibilities for adaptive re-use.

“The challenge is to discover the most appropriate and economically viable use for the building and find ways of repurposing that support the kind of spatial requirements needed.”

The Property Council of Australia WA is another group to advocate change in this space, proposing the uptake of a financing arrangement currently operating in other jurisdictions.

Deputy executive director Alix Rhodes said the ‘Build Upgrade Finance’ would allow owners of ageing buildings to enter into an agreement with a financier and local government, where the owner would pay back the loan through their council rates.

Ms Rhodes said this was a model that had already been successfully adopted in Victoria and South Australia. 

“This model has been utilised to upgrade buildings to make them more sustainable and attractive to tenants,” she said.

“The City of Perth has already voiced its support for the mechanism and financiers are keen to get involved. The only thing holding up the process is a need to change the Local Government Act to allow such arrangements.

“With the Local Government Act currently under review, now is the perfect time to make the changes that will kick-start Perth’s commercial building sector and bring workers back into the CBD.

“The Property Council is calling on the state government to show its commitment to driving the WA economy, and change the Local Government Act to allow Building Upgrade Finance Agreements to attract business and keep WA growing.”