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Futuris Corp ups the ante in CBD

FUTURIS Corporation has announced plans for an office tower at 100 St Georges Terrace.

Caversham Property Pty Ltd, a subsidiary of Futuris Corporation, last week secured a $30 million option over the 6000sqm site and detailed plans to build a 25-storey development.

The new development, to be located near the landmark BankWest Tower, is one of five buildings set to change the Perth skyline.

The Woodside Building already is under construction, while the developers of Westralia Square, Bishop’s See, 56 Mounts Bay Road and now 100 St Georges Terrace are all racing to win enough tenant pre-commitment.

The commonly held view in the Perth property sector is that the CBD office market cannot support all four office developments, meaning the first to win tenant pre-commitment will be the first built.

Depending on its size, this development is likely to cast a shadow over the viability of the other three.

Conservative estimates from Chesterton International show Westralia Square, Bishop’s See and Mounts Bay Road developments alone will create 96,000sqm of net lettable space.

And according to Colliers Jardine research manager David Cresp, the CBD office market had a net absorption of space of between 15,000sqm and 20,000sqm a year.

“Anything above 25,000sqm a year is a very good year … so if someone builds a building of about 40,000sqm, that is more than one year’s supply, in a very good year,” Mr Cresp said.

“Not all of the buildings will go ahead and it will be a matter of who gets the pre-commitment as to which goes ahead.”

The tough competition to secure crucial pre-commitments is likely to see incentives, such as fit-out allowances or a rent-free period, offered to potential tenants.

However, as incentives reduced the net effective rent, tenants may be offered a ‘step-rent’ scheme, according to Chesterton International marketing and research coordinator Chris Freeman.

“What (the developers) may do is entice people with cheaper initial rents with reviews at a fixed rate over a long period, say 5 per cent, thereby assuring continual growth and long-run returns,” Mr Freeman said.

“This is also good for the tenant because they can budget from year to year.”

Mr Freeman also suggested that, instead of constructing a premium grade building and competing with three others for tenants, Caversham instead could build an A-grade tower and offer lower rents in order to secure pre-commitment.

“The new premium buildings, like Westralia Square, will be asking for at least $350 per square metre … instead of joining the rat-race to find pre-commitment, the Caversham building could go in asking for between $325 per sqm and $330sqm,” he said.

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