Perth has experienced a record take up of office space in the last six months, with vacancy rates in the CBD plummeting to 9.5 per cent, giving it the strongest vacancy decrease of any Australian CBD office market.
Perth has experienced a record take up of office space in the last six months, with vacancy rates in the CBD plummeting to 9.5 per cent, giving it the strongest vacancy decrease of any Australian CBD office market.
The long feeble office market has turned around rapidly over the past year, with vacancies going from 13.9 per cent to 9.5 per cent in 12 months, just shy of Perth’s lowest recorded vacancy of 9 per cent achieved in July 2002, surprising even industry analysts.
Perth’s CBD absorbed 51,170 square metres of space in the past six months, the equivalent in space to more than the capacity of the Woodside building.
This figure is easily higher than any six-month period of net absorption since the Property Council began compiling the statistics in 1990.
The vacancy rate in Perth’s other main commercial office market, West Perth, has hit a record low of 5 per cent, which represents a 3.5 per cent decrease from the January vacancy rate of 8.5 per cent.
Property Council executive director Joe Lenzo said prime and A-grade office space were well down on the 9.5 per cent vacancy rate, and that the outlook for the CBD market remained very positive.
“I don’t see how these figures can’t instantaneously put one or two new developments on the go, and it is certain that within months a new building will go ahead,” Mr Lenzo said.
Knight Frank state director of asset services Ian Edwards said 18 months ago the current market climate was unthinkable. He said a lot of tenants were going to be upset when they couldn’t get space.
“In six months we have gone from oversupply to nothing, and it is going to be a big shock for a lot of people,” he said.
“There is a definite shift towards a pre commitment market, because financers simply won’t finance speculative buildings.”
He added that it will be three to four years before a substantial building is completed, and this will just compound rental growth and the landlord advantage.
“Although owners will be overjoyed, this is not a good thing for tenants and it’s going to be a bit of a rollercoaster until more space comes on the market,” Mr Edwards said.
CB Richard Ellis senior director Andrew Denny said the Property Council figures were a stunning set of numbers that would put a big smile on the face of owners of office property.
“Perth is the hottest office market in the country, and tenants will end up being caught without options,” Mr Denny said.
“The last time the market was like this was in 86-87, and we will probably see two new buildings going up in the near future.
“Tenants are already competing for the same space, and things won’t get easier until there is more space on the market, which is at least a few years away.”
The only dangers to the leasing market according, to Mr Denny, are if the resources sector significantly slows or if the Chinese economy significantly slows.
There was also a question of supply if too many new significant buildings were to be built.