New stock to boost demand in Herdsman

With office vacancy rates in Perth CBD and West Perth sitting near zero, suburban office space is in high demand from city tenants looking to relocate.

Among these growing markets, Herdsman will become one of the most sought after, according to a report from Jones Lang LaSalle.

While the amount of finished stock coming onto the market in Herdsman during the past six months has been relatively small, a wave of new supply is due in the latter half of the year.

One of the largest projects, when completed, will be ABN and Macquarie’s joint venture at 18 Parkland Road, containing 15,000 square metres of space.

The first tranche (2,500sqm) of the project is due for completion later this year.

Another three projects – 3 Hasler Road, 20 Parkland Road and 40 Hasler Road – will add a further 12,000sqm to the area, although they will not be completed this year.

Almost equal in size to those three combined is the Garden Office Park extension, due to start in August, which will add 11,482sqm across two buildings.

In total, about 35,000sqm of new stock, or 30 per cent of current supply, is due to come on line in Herdsman by the end of 2009.

According to the Jones Lang LaSalle report, anecdotal evidence suggests  the vacancy rate in Herdsman is somewhere between 1.5 and 3.5 per cent, or about 2,000sqm of available space.

Demand is being driven by companies relocating from the CBD, with several soon-to-be completed projects having secured major tenants.

As reported earlier in WA Business News, national construction group John Holland is moving out of the CBD to take 2,610sqm of space in BGC Group’s building at 67 Walters Drive.

The company will join the Health Department in the building, which has committed to three floors.

Primewest’s project further along at 71 Walters Drive has secured diversified miner Consolidated Minerals Ltd, which will move to Herdsman in August from its current premises in West Perth.

Rents in Herdsman have grown by about 12 per cent in the past six months, sitting between $400/sqm and $475/sqm, which is comparable with Osborne Park and Belmont.

During the same period, rents in other suburban office markets grew by a larger margin, with Subiaco up 15 per cent (to $550/sqm) and South Perth up 22 per cent (to $560/sqm) – the largest rental growth outside the CBD. 

This is still well below the $683/sqm being achieved in West Perth, while rents in Perth CBD are pushing the $1,000/sqm mark.

Currently, rents in the CBD are $820/sqm on average.