Global resource hubs impact office demand

Compared to other resources-driven cities around the world, the Perth office market has performed relatively steady over the past five years. 

Independent property firm Y Research undertook an analysis of commodity office space across 14 global resource hubs in 2016 and again in January 2021. 

Perth emerged as one of the few cities on the list to have actually recorded a decrease in vacancies over the five years: down to 20 per cent from 22.1 per cent in 2016. 

Y Research director Damian Stone said the strength of WA’s iron ore sector, the emergence of new growth sectors, and a limited direct impact of COVID-19 had resulted in Perth recording less market volatility between 2016 and 2021.  

“Cities in North America and the UK, which have experienced, according to local market analysts, ‘a double black swan event’ of plummeting oil prices and widespread local COVID-19 infections, have seen vacancy rates [direct and sub-lease] rise dramatically in recent years,” Mr Stone told Business News. 

“Resources cities have largely recorded significantly higher vacancies between 2016 and 2021. 

“Cities such as Houston, Aberdeen and Edmonton have seen their vacancy rate increase by more than 7 per cent over this frame. 

“Capital cities such as Singapore and Oslo, which would typically have a more diverse range of major occupiers, such as government and financial services, have seen vacancy rate tighten to under 6 per cent.”  

Brazil’s Sao Paulo, an iron ore city, recorded the largest fall in office vacancies over that period, contracting from 23.6 per cent to 19 per cent. 

Meanwhile, Edmonton in Canada (predominantly centred around oil and gas), reported the largest increase in office vacancies, up 9.5 per cent to 20.6 per cent as of January 2021. 

Aberdeen in Scotland, and Houston in the US, both oil and gas-focused economies, have office vacancy rates above 25 per cent.  

“In the years ahead, post COVID-19 changes to the economy and the nature of work will likely see Perth increase its reliance on the resources sector, particularly iron ore,” Mr Stone said. 

“The six largest resources firms – BHP Billiton, Rio Tinto and FMG [iron ore], Chevron, Woodside and Shell (oil and gas) – occupy just under 20 per cent of offices in the Perth CBD.  

“Moves by these companies will have a proportionally high impact on future occupancy.” 

This is an excerpt of the upcoming commercial property feature, published in the next magazine edition of Business News, out Monday February 15.