Office towers may rise again

THE downward trend in vacancy levels looks likely to continue according to Jones Lang LaSalle research analyst Frank Sorgiovanni.

His comments followed the release of the Property Council vacancy level report which showed vacancy levels have dropped to 11 per cent – a ten year low.

“It is anticipated that the rate will fall further with a number of mining projects commencing in 2000,” Mr Sorgiovanni said.

“After a bleak start in 1999 in leasing, a major market turnaround in September saw enquires rise and leasing activity increase approximately 30 per cent.

“This demand was predominately for prime quality space where current premium grade buildings are witnessing their lowest ever rate of around 3 per cent with A-grade under 10 per cent,” he said.

The drop in vacancy levels should have an impact on rental returns after years of stagnant growth.

“The current surge in leasing activity and favourable vacancy rates is certain to apply pressure on office rents,” Mr Sorgiovanni said.

“Jones Lang LaSalle research has forecast an increase in prime rents of about 4 per cent for 2000. There has been no significantly increase in rents for over twelve months,” he said.

This, in turn, will make any new developments more viable, meaning cranes could once again be over Perth.

According to Property Council chief executive Joe Lenzo there were 72,200 square metres in total of new office projects considered for the Perth CBD including the new Woodside building.

“New office projects coming on line in 2000 include the Chamber of Commerce and Industry’s new premises at 180 Hay Street and a development at 181 St George’s Terrace by Cape Bouvard,” Mr Sorgiovanni said.

“This will add nearly 9,000 square metres to the market. The former project is fully precommitted and the latter is seeking tenants now.

“The recently sold Parmelia House has been sitting vacant for some time now, adding about 14,000 square metres to B grade vacancy,” he said.

“Assuming current demand continues to outperform current supply, this space should vanish over the next couple of years with a lack of new stock entering the market.”

One company advocating the merits of more office buildings is real estate agents Colliers Jardine.

In his 13 January column in Business News, Colliers Jardine managing director Ian Campbell wrote of the need for new CBD office space.

“All indicators suggest significant demand will emerge for new space over the next twenty-four months. However it is unlikely that new buildings will proceed without tenant precommitments,” Mr Campbell wrote.

“There are currently a handful of potential development sites in the CBD and the one that proceeds first will be in the best position to negotiate with the surge of potential tenants.

“The need for a new style of fit-out to suit current corporate practices and to keep abreast of technology is what drives many of the large professional service firms and this can only be found in a new building or an extensively refurbished existing building,” he wrote.

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