06/02/2007 - 22:00

Space squeeze on in the CBD

06/02/2007 - 22:00

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Perth’s office market vacancy rates have tightened further with the Property Council of Australia (WA) this week reporting CBD vacancy levels of just 0.9 per cent.

Space squeeze on in the CBD

Perth’s office market vacancy rates have tightened further with the Property Council of Australia (WA) this week reporting CBD vacancy levels of just 0.9 per cent.

This is the lowest rate ever recorded by any major capital city in the 25-year history of its office market reporting and equates to just 11,542 square metres of available space in Perth.

In the six months to January 2007, 24,110sq m of space was absorbed, causing the vacancy rate to fall from 3.5 per cent, recorded in July 2006.

And West Perth has fared no better, dropping two percentage points to 1.1 per cent in the six months to January, the lowest rate on record for this market and equating to just 4,143sq m of space.

By comparison, the Australian non-CBD office vacancy is at 7.3 per cent.

PCA WA executive director Joe Lenzo said that, in the past year, all other capital cities had added significant new stock to their markets, but Perth had lost the equivalent of a major office tower of 34,461sq m to refurbishments and apartment developments.

“The Perth CBD and West Perth are full. If you are a 4,000sq m tenant looking to expand, the CBD cannot accommodate you at present,” Mr Lenzo said.

“Resource companies and the firms that service them, such as engineers, continue to underpin the demand for office space.

“Rio Tinto, Woodside and Worley Parsons all took additional space in the past six months. Alinta and a number of state and federal government agencies also took up further space in the CBD.”

Of the 11,542sq m remaining in the CBD, 10,482sq m is B-grade stock or less.

All grades of space have posted vacancy decreases with the exception of premium, which remained at 0.1 per cent, or 293sq m.

The sobering news for tenants on the vacancy front is further exacerbated by rising rents, with prime rents tipped to approach the $600/sq m mark this year, and B-grade rents following the upward trajectory.

In a sign of just how far the market has gone, B-grade rents hit a new high last month when a US drilling company signed on to pay $405/sq m for 200sq m of B-grade space at 89 St Georges Terrace.

The eight-storey former Perpetual Trustees building, owned by Parkhill Corporation, recently underwent a modest refurbishment and two offers were made to lease the space.

Only two years ago, the same space is believed to have been leased for between $160/sq m and $165/sqm.

Mr Lenzo said all the major new developments announced in the past six months – Raine Square, Bishops See, Century City, 140 William Street and 54 Mounts Bay Road, totalling 145,000sq m of office space – would be mostly full upon completion due to pre-commitments and pent-up demand.

With none of these projects expected to be completed before late 2008, the onus will be on tenants to find space solutions in the meantime by further decreasing workspace ratios, adopting open plan fit-outs and turning meeting rooms into workspaces, Mr Lenzo said.

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