07/10/2014 - 16:38

Suburban office space tightens

07/10/2014 - 16:38

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Vacancy across Perth’s suburban office markets contracted slightly over the past six months, in sharp contrast to the CBD commercial property vacancy rate, which has blown out since the middle of last year.

Suburban office space tightens
STEADY: Demand is solid for suburban office destinations like Osborne Park. Photo: Attila Csaszar

Vacancy across Perth’s suburban office markets contracted slightly over the past six months, in sharp contrast to the CBD commercial property vacancy rate, which has blown out since the middle of last year.

Independent commercial property analysis firm Y Research’s WA Suburban Office Report put the vacancy rate at 14.1 per cent at the end of September, down from 14.6 per cent in March.

In the CBD, the office vacancy rate was 6.9 per cent at the end of June last year, but at the same time this year it had risen to 11.8 per cent, according to the Property Council of Australia.

Y Research chief problem solver Damian Stone said the reason for disparity across the markets was that the resources sector slowdown has had less impact outside of the CBD.

Mr Stone said previous research showed more than 50 per cent of the office space in the CBD and West Perth was leased to resources sector-related companies.

“Suburban office markets have a wider tenant pool underpinned by the state government and the federal government,” Mr Stone said.

Major leasing transactions in the past six months included BGC Contracting and Ventura Homes taking up 12,000 square metres at 20 Walters Drive in Herdsman, and the Department of Transport shifting into around 6,000sqm at 2 Tassels Place, Innaloo.

The Department of Education also moved into 20 Walters Drive, taking up around 2,000sqm.

Mr Stone said rents had fallen between 10 and 20 per cent on 2013 levels, making upgrading space attractive for a lot of firms.

He said WA’s suburban markets were in the middle of a record construction period, which has resulted in more than 100,000sqm of new space completed across 27 projects in the past 12 months.

Between now and the end of 2015, more than 240,000sqm of office space will be completed in the metropolitan area, Mr Stone said.

But Mr Stone said pre-commitments had removed the threat of a blowout in the vacancy rate.

More than 75 per cent of space completed in the past six months is already occupied, in contrast to the previous six months, where nearly half the new space that came to market was empty.

“Discussions with industry stakeholders note that tenants are delaying leasing decisions on the assumption of lower rents in 2015,” Mr Stone said.

“As a result, expect the suburban vacancy rate to remain around current levels before increasing in 2015 as new supply is completed.” 

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