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Landlords rule office market

THE Perth office market has become a landlord’s market as vacancies drop and the pressure falls back on tenants.

Perth’s office vacancy rate has fallen again in the first three months of the financial year to 8.4 per cent, down from 9.1 per cent at the end of June.

The latest market research, released by Jones Lang LaSalle this week, showed premium-grade vacancies in the city centre were 2.7 per cent with only 5,291 square metres remaining in four buildings. A-grade office space was down to 6.1 per cent and B-grade had fallen to 11.8 per cent.

Jones Lang LaSalle research analyst Frank Sorgiovanni said enquiries for office space of more than 2,000 square metres were strong and a few firms were seeking areas more than 5,000 square metres.

“Demand for central city space is remaining strong partly because the mining, oil and gas and engineering sectors have started to make a stronger comeback after remaining relatively quiet over the previous year,” Mr Sorgiovanni said.

“There were no new additions to the city’s stock of office space during the quarter which means the market should continue to tighten. While there are three projects currently seeking pre-commitment, these are a long way from completion.

“The Perth office market has become a landlord’s market. Pre-commitment from expiring tenants never really happened and now they will be forced to renew existing accommodation at reasonably higher market rates as new development won’t be available until late 2002 and early 2003.”

More than 100,000 square metres of prime-grade office space is set to expire over the next two years.

Jones Lang LaSalle said that in line with continuing demand, positive rental growth was continuing in prime-grade stock with gross face rents now averaging $310 per square metre. This had increased from $294 per square metre at the end of the financial year.

Strong leasing activity in West Perth meant the vacancy rate there fell to 6.5 per cent, down from 10.5 per cent at the beginning of the year.

Gross face rents in A-grade buildings have strengthened to increase by an average two per cent to $287 per square metre.

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