Perth CBD office vacancy rate dips to 15 per cent

Perth’s CBD office vacancy has fallen in the past six months but is the second highest of the major capital cities and 3 per cent above the national average, recent Property Council of Australia data shows.

The latest Property Council Office Market Report, launched today, reveals that Perth’s CBD office vacancy rate dropped to 15 per cent in the six months to January this year, its lowest level in seven years.

In July 2021, Perth's CBD office vacancy was at 16.8 per cent. 

Property Council of Australia WA Division executive director Sandra Brewer said growth across multiple sectors of Western Australia’s economy led to a reduction in office vacancies.

“Perth’s office market has proven to be resilient throughout COVID-19,” she said.

“Over the past year, many existing WA businesses have grown, requiring additional space to accommodate more workers." 

Source: Property Council of Australia Office Market Chartbook.

Nationally, CBD vacancy rates lifted 0.2 per cent to 12.1 per cent, driven largely by new supply of office space.

Brisbane and Melbourne were the only major capital cities to show an increase in vacancy rates, to 15.4 per cent and 11.9 per cent respectively.

West Perth’s office vacancy continued to be the highest in the country, at 18 per cent, but has recovered by 4 per cent in the past 12 months.

Source: Property Council of Australia Office Market Chartbook.

JLL WA research director Ronak Bhimjiani said he was not surprised to see Perth’s CBD office vacancy rates continuing to fall.

“WA’s economy grew by 5.9 per cent in 2020-21 – the strongest of all states for the second year running and putting us in a unique position of having one of the highest economic growth rates globally,” he said.

“This has translated into greater take-up of CBD office space amongst businesses, predominantly within the mining and professional services sectors,” he said.

The report also showed Perth CBD’s net absorption rate in the six months to January was 47,853 square metres, a level not seen since July 2012.

Perth’s sublease vacancy rate dropped to a decade low of 0.9 per cent.

“Both these metrics point towards an enormous recovery in CBD office market conditions, especially considering current trends around hybrid working and the evolution of working practices,” Mr Bhimjiani said.

“The positive net absorption figure shows that a number of organisations are still expanding their footprint to accommodate headcount growth.”

Source: Property Council of Australia Office Market Chartbook.

CBRE office leasing senior director Andrew Denny said the recovery in Perth’s office market was widespread, across locations and office building grades.

“Strong business conditions, fuelled by the mining and IT sectors, are leading to many businesses expanding strongly and taking larger premises,” he said.

“The flight to quality and to the centre are both still very strong trends, and in 2021 we saw more businesses relocate to the CBD from the suburbs than ever before.

“Moving forward there are a number of headwinds, which could slow the market. These include significant COVID in WA for the first time, the Federal election, and the stock market correction. These are, though, likely to be temporary and relatively minor factors.”

Mr Denny added that development in the Perth CBD was progressing strongly, with construction of the Chevron building in Elizabeth Quay, Capital Square Tower 3 and Westralia Square Tower 2 all underway.

“The other notable potential projects are Brookfield with 31,000sqm on Lot 6 at Elizabeth Quay and AAIG with 60,000sqm on Lot 4 at Elizabeth Quay. These projects are likely to have the biggest impact on the Perth office market moving forward,” he added.

Ms Brewer said Perth’s office market recovery had been a slow journey, with vacancy rates remaining elevated since the end of the last mining boom.

“As WA continues to navigate the challenges of COVID-19, we need to ensure policies look for opportunities to reduce the cost of doing business and provide businesses with certainty,” she said.

“Actions such as removing or reducing the Perth Parking Levy, providing clarity over border arrangements, and investigating opportunities for more significant business, investment and skilled talent attraction will all help secure the long-term success of the city.

“We need to leverage every opportunity to keep office vacancies trending lower, creating a more vibrant city centre.

“Certainty enables businesses to scale up, hire staff, sign leases and lock in long term investments.”