Tenants occupying premium office space in Perth’s central business district have added cause for concern this month following a record $650/square metre net rental review agreement at Central Park.
Tenants occupying premium office space in Perth’s central business district have added cause for concern this month following a record $650/square metre net rental review agreement at Central Park.
Power generation and wholesale marketing tenant, TransAlta Energy, is understood to have signed the new figure for just 381sqm of space on level 36 of the building, far eclipsing other rumoured deals being negotiated in excess of $600/sq m.
The price spike goes against expectations, given most property pundits predicted earlier this year that Perth rents would not likely surpass the $600/sq m mark until Christmas 2007.
But with a Perth office vacancy levels nudging 0.5 per cent and decent new supply nearly two years away, Perth landlords are reaping the rewards, with rents across all grades likely to post new records this year.
Colliers associate director of research David Cresp said the market was moving faster than most had anticipated, and $700/sq m was not out of the question for premium-grade stock by the end of 2008.
Mr Cresp said there was very little difference now between the price of A-grade and B-grade office space, reflecting the extent of the shortage in Perth.
“One city tenant has just negotiated a rate of $500/sq m for 1,000sq m of A-grade space and there are two B-grade buildings in the process of securing in excess of $450/sq m,” he told WA Business News.
Mr Cresp said parallels could be drawn between the Perth office market and that of Brisbane, which was expected to achieve gross rents of $800/sq m this year.
Brisbane’s CBD office vacancy dropped from 1.7 per cent in January this year to 0.62 per cent in March, while Perth has reportedly fallen from 0.9 per cent to 0.5 per cent vacancy since January.
“Even though Brisbane is two years ahead of Perth with supply coming through sooner, the direction of the markets is pretty similar,” Mr Cresp said.
“The Brisbane vacancy was under 4 per cent in July 2005 when Perth was at 13 per cent.”
Brisbane was in a much better position than Perth, however, with 27 potential projects and about 400,000sq m of office supply to start coming through this year, he said.
But Perth office rents could reach those of Brisbane in the next two years while its vacancy rate continued to hover near zero, according to Mr Cresp.
Among the Perth CBD tenants understood to be in line for reviews in excess of $650/sq m in the coming months are Minter Ellison and Mallesons Stephen Jaques, both of which are tenants in Central Park.
