Perth office space crisis intensifies

Office vacancy rates in the CBD are continuing to tighten with new figures showing the vacancy rate has fallen to a record low of 0.53 per cent at the end of September, down from 0.7 per cent in July.

In its latest office market report, Jones Lang LaSalle reveals the Perth market has now experienced 12 months of vacancy levels below 1.0 per cent and prime space (comprising premium and A-Grade space) is officially full for the first time.

Further strain on the market is expected next year with just 156,200sq m of new space due to be completed by the end of 2009, likely to be delayed until 2010 according to the report.

Of the total 238,200sq m of new office space under construction, about 70 per cent is estimated to be pre-committed.

Jones Lang LaSalle national director of office leasing Warren Wright said the vacancy rate would never hit rock bottom, but could go as low as 0.3 per cent next year.

Mr Wright said the vacancy situation was having a major impact on rental reviews, and tenants had little ground to argue.

"I don't think we'll get to zero vacancy because there's always something there. But I'm sure the vacancy rate can go lower, there's barely anything around and no real stock for at least the next two to three years," he said.

"As soon as you do a rent review at a certain level, there is a leap frog effect on rents. I'm sure prime rents will hit $700/sq m next year as a result."

Rental growth has indeed remained strong this year with September quarter figures showing average rental growth of just over 20 per cent for the quarter.

Jones Lang LaSalle found prime gross face rents have increased in the first nine months of 2007 to a point where they are almost on par with the Brisbane CBD.