Perfect storm brewing for Perth office market
Perth’s CBD office market has seen a significant improvement in demand for Prime grade space over the past 12 months – signifying the start of the market rebound, according to leading office market specialists Sheffield Property.
“Nothing ever stays the same, and the only consistent variable in any market is change,” said Sheffield Property Joint Managing Director Mark Clapham.
“A perfect storm is again brewing for the Perth office market.”
Mr Clapham said the largest vacancies in the Perth CBD office market over the last 12 months, which totalled 74,000sqm, were in Kings Square 1 at 566 Wellington St, the Quadrant at 1 William Street and 240 St Georges Terrace.
“These are now largely fully leased. As a result, there are only a handful of contiguous vacant floors remaining available in CBD Prime grade office buildings in Perth,” he said.
The sudden take up of office space has been driven by four major overarching themes – the first of which was growth in the engineering services sector.
“This sector has traditionally acted as the bellows for the office market vacancy levels,” said Mr Clapham.
“As the mining sector continues to improve and the oil and gas sector starts to bounce back, so has the demand for office space from this sector.”
The migration of office tenants from suburban locations to the CBD, seeking exceptional value lease deals, better quality buildings, staff amenity and public transport had also continued, as had the flight to quality for existing CBD tenants.
These tenants had acted on high levels of lease incentives and reduced rents to upgrade their office accommodation in the city, moving from A and B Grade buildings to Premium and A Grade premises.
The final factor was the lack of significant new office developments under construction in the Perth CBD and CBD Fringe.
“Chevron’s new headquarters at Elizabeth Quay is due for completion in 2023, but only has around 8,000sqm of Premium space to offer the market of some 50,000sqm in total,” said Mr Clapham.
“The impact of these market dynamics is creating a perfect storm for Prime grade rising rents and falling incentives, readying the market for the next office development cycle.”