03/04/2007 - 22:00

Record-breaking CBD rents likely to continue

03/04/2007 - 22:00

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Those hoping for relief in CBD rents may be disappointed, despite the expected increase in Perth office space in coming years.

Record-breaking CBD rents likely to continue

Those hoping for relief in CBD rents may be disappointed, despite the expected increase in Perth office space in coming years.

Savills research estimates only 3,600 square metres of contiguous space in existing buildings will become available in 2007, effectively placing the vacancy rate at zero.

Divisional director commercial leasing Graham Postma said prime face rents would hit $600/sq m by Christmas and would likely keep breaking records over 2008 and 2009.

A-grade and B-grade face rents would follow suit, he said, the former likely to hit the higher end of the $500/sq m to $600/sq m bracket by 2009-10.

And B-grade rents are expected to grow substantially from an already high base of $400/sq m currently.

“As of this week, on a full-floor basis, assuming no other deals have been done, we estimate vacancy in the Perth CBD could notionally increase to around 9 per cent in early 2010,” Mr Postma said.

“At that time, face rentals will not go down, although a little increase in incentive levels will force effective rents to drop.”

Mr Postma said a healthier market would still result, where tenants would have the opportunity to expand and grow their businesses.

Colliers International associate director research consultancy, David Cresp, said premium face rents would probably peak in late 2009 and it was unlikely they would fall thereafter despite the climbing vacancy rate. 

“It really is the best time to pre-commit because tenants can go out now and sign up for new A-grade space at just below $500/sq m. This is a significant saving if you consider where rents are heading,” he told WA Business News.

“We expect a total of 300,000sq m of space to come online by 2011, and if this happens the vacancy rate would rise to slightly over 10 per cent by late 2011.

‘‘It’s still not a bad position to be in because the market will be closer to equilibrium,”

Mr Cresp said it was unlikely Perth would ever experience a 32 per cent office vacancy rate like that in January of 1993, based on the forecast level of new supply and WA’s strong economic fundamentals.

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