Office vacancies remain static

OFFICE vacancies in the City of Perth defied industry predictions of a tightening in vacancy rates to remain unchanged at 11 per cent, according to the Property Council of Australia’s office market report.

However, this is still at the lowest level since January 1990.

Perth’s four premium towers – Central Park, QV1, Exchange Plaza and Bankwest – experienced an increase in vacancy levels from 3.4 per cent to 4.2 per cent over the past six months, while the A grade vacancy rate fell 1.5 per cent to 8.5 per cent.

For the six months to June, more than 22,000 square metres has been recorded in gross absorption.

This includes the rapid leasing of Parmelia House where 14,000 square metres of office space is already 85 per cent committed to new tenants.

Chesterton international managing director Graham Iddles said the premium vacancy rate might be misleading.

“The temporary increase in premium grade vacancies may be a deliberate part of a long-term strategy toward fully letting these buildings,” Mr Iddles said.

“We are aware of a number of major companies seeking between 3,000 square metres and 6,000 square metres of premium grade accommodation, but the space simply isn’t available on consecutive floors.

“Managers of premium buildings may allow selective lease expiry, freeing up floors in order to attract these large, stable companies on long-term lease agreements.”

He said, because of the lack of premium space, some companies were looking at the top end of the A grade market and were finding that quality buildings such as Hartley Poynton’s headquarters and the Forrest Centre offered acceptable alternatives.

Mr Iddles is confident both the premium and A grade markets would be bullish over the next six to 12 months, leading to a vacancy rate of under 10 per cent – the lowest for well over a decade.

Jones Lang LaSalle research analyst Frank Sorgiovanni said prime rental growth had soared, increasing 21 per cent over the past six months.

“It’s truly become a landlord’s market,” he said.

“The power is in the hands of the building owners who can dictate current market rates to expiring and new tenants.

“Many 10-year leases are nearing expiry over the next few years after the construction of the early 1990s.”

Mr Iddles said the outlook for West Perth, which suffered from a withdrawal by

mining-related companies following the Asian crisis, looked promising through increased interest from Internet companies.

The PCA figures show West Perth performed better than the CBD in the race to fill office space.

West Perth vacancies declined significantly to 8.1 per cent, compared with 10.5 per cent for the six months to January.

“West Perth is mirroring the situation in North Sydney, where Chesterton International research shows about 60 per cent of lease enquires are coming from technology-based companies,” Mr Iddles said.

"It is now virtually impossible to find space over 500 square metres in North Sydney, and there is every indication West Perth is heading in the same direction.

“These low vacancy levels in the CBD and West Perth can only lead to increased construction.”

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