06/02/2020 - 06:33

Office market gaining steam as recovery takes hold

06/02/2020 - 06:33

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Professional services and flexible office providers have provided a boost to momentum in Perth’s CBD office market, with the Property Council of Australia’s vacancy rate continuing to decline and top-quality office accommodation becoming scarce.

Office market gaining steam as recovery takes hold
Demand is increasing from tenants seeking to be located in Perth's CBD. Photo: Gabriel Oliveira

Professional services and flexible office providers have provided a boost to momentum in Perth’s CBD office market, with the Property Council of Australia’s vacancy rate continuing to decline and top-quality office accommodation becoming scarce.

The Property Council today released its bi-annual analysis of office markets across the country, with Perth’s vacancy rate falling to 17.6 per cent, down from 18.5 per cent at this time last year.

While Perth’s vacancy rate remains high compared to the national rate of 8.3 per cent, options for firms with large tenancy requirements are becoming few and far between.

Vacancy in premium stock fell to 8.1 per cent, the Property Council said, as tenants took up 32,738 square metres of previously vacant space in the six months to the end of January.

Flexible office providers took up more than 10,000sqm of that space, Property Council WA executive director Sandra Brewer said.

WeWork accounted for the city’s biggest leasing deal of 2019 at 7,900 square metres, while also leasing 3,400sqm at Northbridge’s William Square, while the IWG-owned Spaces brand also took a significant tenancy of 3,000sqm at Raine Square. 

National funds management and development giant Dexus also launched a co-working space in 2019 in its premium Dexus Place at 240 St Georges Terrace.

“It’s no secret Perth’s office market has faced challenges, but there’s now a greater sense of optimism as WA’s economic fortunes are expected to improve,” Ms Brewer said.

JLL WA head of office leasing Nick Van Helden said professional services were the clear standout performer in the market in 2019, while mining sector firms also performed strongly.

“These two sectors are large contributors to CBD office space and strong take-up figures within these sectors usually result in robust conditions,” Mr Van Helden said.

Mr Van Helden said he expected supply to tighten further in 2020, particular for contiguous floorplates in the city’s best quality buildings.

CBRE senior director of office leasing Andrew Denny said he expected the pace of Perth’s office recovery to ramp up in 2020.

“We are seeing falling vacancies, continuing reductions in incentive levels at the top end of the market and some rent increases,” Mr Denny said.

“It is likely these incentive reductions will spread to the A-Grade sector of the market.”

Mr Denny said he expected vacancies in the CBD to fall to 15.5 per cent by the end of the year, with several universities considering taking up large tenancies a major factor.

Outside of Perth CBD, vacancy rates in West Perth increased over the period to 17.5 per cent, up from 14.8 per cent in January 2019.

The Property Council also began tracking East Perth vacancy rates last year, which recorded an overall vacancy rate of 21.8 per cent.

"The greater vacancy is in the secondary stock (26.4 per cent), which accounts for 194,057sqm of the 336,236sqm," Ms Brewer said.

"Now we have the numbers, we can help decision makers devise ways to revitalise East Perth to create a more lively centre.”

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