No rest in sight for booming Perth

Western Australia’s powerhouse economy has moved into top gear, sparking unprecedented levels of demand for infrastructure and creating a volume of construction work across the state that’s challenging the sector.

Major new office blocks, a $1 billion hospital for Perth’s southern suburbs, sports arenas and a giant residential apartment project are just some of the major projects on the books.

But public and private sector developers, architects, consulting engineers, town planners, landscape designers and building contractors are under pressure to deliver the goods on time and on budget while dealing with acute shortages of skilled contractors and facing cost increases of almost 12 per cent this year.

In the Perth CBD, net office absorption of 130,000 square metres of office space over the past two years has forced vacancy rates to plunge to a record low of 0.9 per cent in January this year, meaning office space is almost non-existent across all grades.

Despite the demand for office space, developers and financiers remain cautious of risk and are delaying construction starts by months while big companies contemplate their next move.

In this regard, the two biggest proposed office projects – Multiplex’s City Square on the former Westralia Square site and the second stage of its joint venture project with Hawaiian in Bishops See – are chasing prospective tenants such as BHP Billiton, Chevron, and Worley Parsons for lucrative pre-commitment contracts.

Among Perth’s most significant proposed office developments to get the green light is 140 William Street, due primarily to its substantial state government pre-commitment of 22,000sq m of office space out of a total 36,000sq m, and its proximity to what will be Perth’s busiest transport node.

A group of developers known as the Evolution Consortium and spearheaded by Perth newcomer, Cbus Property, will start construction once the railway station is ready this year.

Scheduled for completion at the end of 2009, the three-tiered high-rise building of six, 15 and 20 storeys is expected to set a benchmark in sustainable workplace design.

Its 7,000sq m retail precinct on the lowest two levels will be arranged around a series of laneways and public squares, breaking with Perth’s traditional ‘mall’. 

Architect and HASSELL senior associate Dirk Collins said its brief was to provide a landmark development connecting public and civic spaces while demonstrating best practice in conservation and activation of three heritage buildings.

“We have developed an architecture which responds to the particular qualities of the Perth climate, a language which responds to light and shade, hot and cold,” he said.

The project is on target to meet the 4.5-star Australian Business Greenhouse Rating for energy efficiency as well as a five-star rating from the Green Building Council of Australia, both schemes having been widely adopted on a voluntary basis by the building industry.

Along with 140 William Street, City Square and Bishops See, a further three major office projects planned for Perth will together help create a forecast supply in the order of 275,000sq m in the years 2009-2011.

Pivot Group and the Industry Superannuation Property Trust began work last year on a new $260 million commercial and retail complex at 100 St Georges Terrace, which will supply 28,000sq m of office space above a total of 13,000sq m of retail space anchored by Woolworths.

Despite not having an office tenant committed prior to construction, the developers signed Japanese oil and gas company INPEX in March to 7,000sq m and are rumoured to have NAB under contract to take 9,000sq m.

Other projects to sign major tenants include Luke Saraceni and Hossean Pourzand’s $450 million Raine Square office development, which secured BankWest to anchor 42,500sq m of space from November 2009.

Down at 239 St Georges Terrace, Bishops See developers Hawaiian and Multiplex have started stage-one work on their 18,000sq m southern tower after signing KPMG to the project and, most recently, Macquarie Bank.

Other mooted office projects set to appoint builders shortly include Cape Bouvard’s $60 million, 20,500sq m office tower at 54 Mounts Bay Road, and the Uniting Church for its $100 million office and retail development at Wesley Arcade.

The latter is expected to deliver a total of 14,000sq m of office space located within the 10-storey Wesley Building, the three-storey Wesley Centre, and the three-storey Queens Building in the next two years.

Until the majority of new supply starts to filter into the market from early 2009, office upgrades and refurbishments are expected to keep leasing agents busy.

Refurbishment projects due during the period include the GPO building at 3 Forrest Place, which will provide 10,000sq m of space for engineering firm Maunsell, the former Royal & Sun Alliance building at 41-43 St Georges Terrace providing an extra 2,800sq m, and the Alexander Centre at 99 St Georges Terrace.