Investors eye hot Perth market

It's rare for the stars to align over all sectors of the property market, but in Western Australia right now the commercial, industrial, retail residential and land markets are all experiencing robust growth.

This is in stark contrast to the situation in other states and capital cities, with many battling through stagnant conditions and some even going backwards.

As Perth’s CBD office leasing market has transformed from lukewarm to white hot during the past 12 months – to the point where the record absorption rates are leading the nation, vacancy rates are falling, and rents spiralling – investors across the nation are sitting up and paying attention.

Last year, only one CBD sale over $10 million was recorded, however in 2005 activity has been rife in the CBD sector as locals and interstate purchasers snap up commercial property in mostly off-market deals.

It seems natural that, with all markets in such positive territory, some of property’s big players would be considering expanding their WA portfolios.

The big four listed property groups – Stockland, Australand, Mirvac and Multiplex – all have a presence in the WA market, but it is mainly through their development arms, while their trusts are heavily weighted to the east coast.

However, the shift of the market in WA, coupled with long-term growth predicted for the state, may increase the level of interest from the big listed trusts.

Mirvac this year acquired the Kwinana Hub Shopping Centre as the first WA asset into its commercial investment portfolio valued at more than $3 billion, and has been actively looking at other Western Australian assets.

Mirvac’s director of property acquisition and agency services, Andrew Butler, told WA Business News the business was interested in the WA commercial market, given the climate of the sector.

“It is all good news coming out of Perth, which has not happened for a long time,” he said. “The market has really turned in the last six months, and I’m sure Mirvac is one of many groups, trusts and super funds looking at commercial property in WA.

“We have bought the Kwinana Hub Shopping Centre and we can hopefully add a few more to that.”

Mr Butler said Mirvac was particularly interested in CBD assets, and after failing in a bid to buy half of Central Park earlier this year, would be running the ruler closely over any assets that came up, including 140 William Street.

Expressions of interest closed early this week for potential purchasers of 140 William Street, which LandCorp is selling with a guaranteed 22,000 square metre government tenancy, and extremely strong interest is expected from investors, institutions and trusts.

An industry source suggested that, of the four companies, Mirvac was the most likely to be expanding in WA.

“Stockland might, Australand isn’t aggressively looking from an investment point of view, and the Multiplex trust is probably close to overweight in Perth,” the source said.

Originating in WA, Multiplex’s investment portfolio is more heavily weighted towards WA than the other big listed property companies. And while the construction arm of Multiplex took a beating in profits this year, the property trust performed well.

Multiplex is poised to take advantage of the office leasing market with a 50 per cent interest in two office development sites in the city – City Square and Bishops See.

It is also widely tipped to be a strong contender for the 140 William Street site.

Stockland holds 3.9 per cent of its $1.8 billion investment portfolio in Western Australia through a 50 per cent leasehold ownership of Exchange Plaza. The company’s $3 billion shopping centre portfolio has a 5.4 per cent representation in WA with Bull Creek Shopping Centre and a 25 per cent ownership of Karrinyup Shopping Centre.

Australand is the most under-represented of the four in WA, with only 1 per cent of its $1.1 billion investment portfolio in this state.

WA general manager Chris Lewis said there was more of a concentration on the development side of the business in WA.

“The company does have the skills set in the eastern states, which we can bring across, and we will look at all opportunities and weigh those up against the direction of the business,” Mr Lewis said.