Rents to soar as office market tightens

Office rents are set to soar by 22 per cent by the end of the year as booming conditions in the resource sector make their imprint in the Perth CBD, according to industry analysts.

The Property Council of Australia’s latest office market report showed the office market has tightened faster in Perth than in any other capital city, from 10.2 per cent in January this year to 7.8 per cent in June.

The council’s report showed total vacancy in Australian office markets dropped from 9.6 per cent to 9.0 per cent over the same period.

All of the CBD office markets surveyed experienced decreases in vacancy from the last period, with the exception of Sydney.

Net absorption of office space in Perth was 33,087sqm in the six months to June 30, the highest rate since January 2006 and almost four times the 20-year average.

CBRE senior director of office services Andrew Denny said options for tenants seeking spaced of 800 square metres or more were extremely limited not only in the CBD, but also in suburban office locations.

“We are starting to see rising rents as vacancies and incentives levels fall,” Mr Denny said.

“This will continue for the balance of 2011. We expect face rent increases of 10 per cent and effective rent increases of 22 per cent over the 2011 calendar year.

“2012 will see a pause, with significant backfill space entering the market, before 2013 sees future substantial rent increases on the back of falling vacancy levels.”

Mr Denny said the tight market conditions would likely prevail into the foreseeable future, with the low number new office buildings currently in the development pipeline.