Perth office vacancy highest in nation

Perth’s office vacancy rate has grown to 15.8 per cent in the past six months, up 0.8 per cent since January and the highest among the nation’s capital cities.  

The latest Property Council of Australia office market report shows that office vacancy has risen from 15 per cent in January to 15.8 per cent in July, largely driven by a 2.4 per cent increase in supply.

Dynons Plaza on Hay Street and The Atrium on St Georges Terrace are among the new office properties in the CBD that have boosted supply in the last six months.

Property Council of Australia WA Division executive director Sandra Brewer said the increased vacancy was only one part of the story.

“What the results show, is that three years into the pandemic, the death of the office has been highly exaggerated,” she said.

“Overall, the fundamentals for the Perth office market are strong. Tenants are jumping at the opportunity to take up new space, and sub-leasing rates are the lowest in the country. These are all good signs of an improving market,” she said.

July's figures were a significant decrease on the highs during the pandemic of 19.9 per cent office vacancy in January 2021. 

Brisbane showed the second highest office vacancy at 15.4 per cent, Adelaide at 14.5 per cent, Melbourne at 12.9 per cent and Sydney recorded 10.1 per cent office vacancy.

Source: Property Council of Australia. 

West Perth’s market improved, with a 2.5 per cent decline in office vacancy since January.

Savills Australia National Head of WA Graham Postma said the July statistics confirm demand in the Perth office market remained positive. 

“Net absorption in the CBD for the 6 months to July was over 13,000 sqm and almost 11,500sqm in West Perth. Despite some uncertainty in the short term, the market is expected to continue with this momentum,” he said.

CBRE senior director of office leasing Andrew Denny said the increased CBD vacancy was a result of new stock entering the market.

“This includes the 13,000sqm Dynons refurbishment, the also-refurbished Atrium and the newly-built Capital Square Tower 2; together these buildings account for over 32,000sqm of new supply,” he explained.

“Despite Western Australia experiencing its first major COVID outbreak in 2022, underlying tenant demand is still strong.

“Expanding tenants remain a key and dominant feature of the market, particularly in the mining and engineering sectors. COVID, stock market declines and the Federal election have all failed to impact tenant demand.”

Mr Denny added that rents were starting to increase in some buildings, with West Perth and the suburbs likely to have stronger increases than the CBD.

He said the new build market would have a strong impact going forward.

“One The Esplanade, a 55,000sqm project with Chevron as its major tenant, and the 17,000sqm Capital Square Tower 3 are due for completion in 2023, while the 9,000sqm Westralia Square Tower 2 should be completed in 2022,” he added.

Cushman & Wakefield head of leasing WA Roly Egerton-Warburton said as Perth headed into the new financial year, the market remained highly active.

“Demand is very strong in core, fringe and suburban markets,” he said.

“Amid rising interest rates, inflation and a correction in the financial markets, tenant demand has continued to grow at an impressive rate.

“The mining and energy sector and state government are driving activity, as are professional service firms choosing to relocate to premium grade assets to secure the best talent.”

JLL head of office leasing WA Nick Van Helden said the surge in domestic economic and labour market activity has ensured steady growth in CBD market conditions. 

“Enquiry levels and overall market sentiment remains positive, with JLL inspection and tenant brief numbers in the first half of this year surpassing pre-pandemic levels," he said.  

“Future demand for Perth CBD office space is expected to be driven largely by the mining and professional services sectors, satisfying increases in global commodity demand through infrastructure projects. According to JLL Research, mining tenants represent 32% of overall Perth CBD space. Any uplift in the mining sector usually bodes well for the Perth CBD office market.