The buoyant state of Perth’s leasing market may be good news for building owners and developers, but tenants are being warned of a shortage of space and increasing rents as vacancy rates continue to drop
The buoyant state of Perth’s leasing market may be good news for building owners and developers, but tenants are being warned of a shortage of space and increasing rents as vacancy rates continue to drop.
As the city’s premium and A-grade buildings approach 100 per cent occupancy, tenants whose leases are expiring soon have limited options, particularly if they’re looking for contiguous floors.
Savills research shows that Perth’s full floor availability is 2.9 per cent for premium buildings, with only six floors available, and 9.2 per cent for A-grade, with 39 floors available.
The maximum contiguous space available in both premium and A-grade is five floors, meaning that occupiers looking for space over 2,000 square metres have very limited options in the CBD. And those opportunities are rapidly being snapped up.
Savills director of commercial leasing Graham Postma said rents were increasing dramatically as incentives declined to 15 per cent and below.
“Organic growth for companies is a problem in 100 per cent occupied buildings, and tenants need to know what their requirements are going forward,” he said.
“The market is rapidly changing and requires constant monitoring – tenants are just getting fewer options. Once someone commits to a new development, there will still be a significant time lag until that building gets out of the ground, and we are talking significant increases in rent and decreases in incentives until then.”
Mr Postma said that, in the interim, lesser grade building owners were likely to consider refurbishment.
All available premium full floors are located in Central Park, and it is understood that advanced negotiations have taken part on a significant portion of that space.
Last week, NSC Corporate announced that Alinta Limited had taken a whole of building, 10-year lease over the 7,400sq m at the Cape Bouvard development, Allendale II.
Cape Bouvard general manager Todd Morcombe said securing a whole of building tenant of Alinta’s quality was a tremendous outcome for the asset in the rapidly tightening Perth market.
NSC Corporate joint managing director Steve Carulli said Alinta’s decision to commit to the building six months prior to its practical completion ensured its ability to secure the whole of the building ahead of several other parties that were showing a strong interest in the project.
“Cape Bouvard’s foresight in committing to the construction of Allendale II has been well and truly endorsed by the level of market activity and the drastically falling vacancy rate in the Perth CBD,” Mr Carulli said.
It was also announced last week that Perth accountancy firm Pitcher Partners has leased the whole of level 17 in A-grade building 140 St Georges Terrace, leaving only three floors in the building available for lease.
Joint leasing agent Andrew Denny of CB Richard Ellis said Pitcher Partners was the latest in a string of West Perth tenants to have relocated to the CBD in recent months.
“Together with expanding in situ tenants, and new requirements from the resources sector and the WA State Government, these are the reason for the large falls we are seeing in CBD vacancy rates,” Mr Denny said.
