Leasing market tightens up

Perth’s CBD office leasing market is emerging from the slumber of recent years as tenants rush to take advantage of low rents and incentives.

According to office leasing agents, tenants are scrambling to take advantage of the current situation before market demand drives prices up and incentives down.

Several agents have revised their predictions from the beginning of the year, suggesting the leasing market will pick up much quicker than expected.

Knight Frank State director of asset services, Ian Edwards, said he expected there to be a shortage of stock in the near future.

“Western Australia is just booming, and with $40 billion worth of resource projects on the books. The population is growing, profits are growing, people are making money, and expanding their space,” he said.

“Although there are several proposals for new buildings, they will generally take about three years to get up, so between now and when a new building hits the market there will be a lot of pressure on rent.

“There just isn’t the space for all the tenants in the market, and incentives will drop off and rents will go up.”

CB Richard Ellis manager of research Andrew Woodley Page said the leasing market was incredibly strong and had undergone significant growth in the past six weeks.

“There has been a lot of organic growth, and we are expecting in excess of 45,000 square metres of net absorption this year,” he said.

“We anticipate reaching a 10 per cent vacancy equilibrium three to four years earlier than predicted at the start of the year.

“When business is thriving, more profit is created, more people are employed, more space is needed – it is all part of a cycle.

“The economy is a huge factor in driving leasing take up – it is strong without being overheated, and we won’t see a severe monetary policy to slow it down.”

There are several large tenants in the market actively looking for space as far ahead as 2007, such as the Department of Premier and Cabinet (24,000sq m), the Department of Justice (7,500sq m, National Australia Bank (8,000sq m), Alinta Gas (4,000 to 5,000sq m).

Other tenants have more immediate demands, with the Department of Health (7,500sq m) and B Digital (3,000sq m) vying for space in 1 Adelaide Terrace, and Pitcher Partners also needing 1,000sq m of space.