DECENTRALISATION of tenants to suburban locations and the downsizing in corporate organisations has caused the Perth CBD office market to experience a negative net absorption over the past three years to September 2003.
DECENTRALISATION of tenants to suburban locations and the downsizing in corporate organisations has caused the Perth CBD office market to experience a negative net absorption over the past three years to September 2003.
Office vacancy figures in A-grade offices have crept up from 10.3 per cent in January last year to 12.1 per cent in January 2004. In the premium sector, vacancy figures have increased from 6.4 per cent to 7.6 per cent in the same period.
However, despite these sluggish figures, signs are pointing to a positive change in the CBD office leasing market.
Chamber of Commerce and Industry figures have revealed that business confidence for the next 12 months is at new high levels. Coupled with this is an increase in office-leasing enquiries in the CBD. These factors have led some market analysts to forecast that the Perth CBD market will turn the corner this year.
A Jones Lang Lasalle report has predicted that net absorption will reach 15,000 square metres in 2004, before reaching 25,000sq m in 2005. Average effective rental growth of 5.1 per cent over 2004 and 2005 has been tipped, with a projected vacancy rate of 14.4 per cent by 2005.
Driving the growth are the strengthening global economy and commodity prices, and expansionary activity in the State government sector.
The mining and resources sector has long had an influence on the performance of the State’s economy and the vibrancy of the Perth CBD office market.
It’s no surprise, therefore, that the burgeoning local mining and resources sector forms the basis of the Jones Lang Lasalle forecast.
The report states that: “The significant current pipeline of WA-based mining and resources-related projects is likely to drive stronger growth for financial and professional business service employment – a sector that is a substantial user of office space.”
Investment in WA mining and resource-related projects, both committed and under consideration, has been valued at $4.6 billion for the next two years.
According to the report, if WA mining and resource project expenditure over 2004-05 meets this baseline forecast, white collar employment will increase by 5,647 jobs, translating to 27,500sq m of positive net absorption of office space.
Colliers International market research analyst David Cresp’s short-term forecast for the CBD office leasing market is not as up-beat.
At the recent Property Council breakfast, Mr Cresp said the office leasing market would continue to be a tough market for the next 12 months.
He said that, although net absorption in the CBD was expected to increase, vacancies would also increase.
“New supply will be keeping CBD vacancy at a relatively high level,” Mr Cresp said.
New supply coming on board over the next two years includes the St Martins-Hay Street expansion (2,400sq m), CTA Building (6,690sq m), 4-6 Bennet Street (9,968sq m), and the Convention Centre Office building, (11,300sq m). When complete, the refurbishment of 1 Forrest Place and 140 St Georges Terrace will add a further 11,800sq m of new supply.
“The significant current pipeline of WA-based mining and resources-related projects is likely to drive stronger growth for financial and professional business service employment.”
- Jones Lang Lasalle report
