Tenants pounce on prime CBD office space

Office leasing deals are flowing through the Perth CBD as firms move on prime positions in a market described as the most favourable for tenants since the recession of the early 1990s.

The latest data from analytics firm Y Research shows that more than half of the 278 office buildings in the city have a vacancy, giving companies with expiring leases unprecedented opportunity to upgrade their address.

And it’s not just the physical vacancy that is giving tenants the advantage – with around 400,000 square metres of vacant space available; landlords are offering deals not seen since ‘the recession we had to have’.

Property analyst Gavin Hegney told a recent CoreNet Global event that the timing could not be better for non-mining businesses planning to expand.

“One, you can get office space and it’s cheap,” Mr Hegney said.

“Two, there are some very high-calibre people around town looking for work.

“Those people are available and with costs coming down you can actually grow a business.”

Law firm Gilbert + Tobin was the most recent mover, signing a deal to relocate its office from West Perth to the top floor of Brookfield Place Tower 2.

Gilbert + Tobin Perth energy and resources partner Michael Blakiston said the office shift gave the firm the opportunity to replicate its award-winning open plan design and layout in Sydney.

Mr Blakiston said the blue-chip address of Brookfield Place Tower 2 would enhance the law firm’s standing.

“We decided to reinforce our partner ranks and relocate the office to a premier CBD location, despite the challenging market,” Mr Blakiston told Business News.

“We saw it as incredibly important to align our brand with Gilbert + Tobin’s east coast brand.”

Earlier this year, Business News reported that accounting firm RSM was one of three recent major signings at Exchange Tower, the others being ARUP, Fujitsu and Moore Stephens.

RSM Perth managing partner Col Paoliello said the opportunity to secure signage rights at the prominent landmark, as well as a more spacious and prestigious office space, was too good to pass up.

“Having our name in lights across Perth will help to align RSM Australia with global rebranding initiated in 2015, which supports a sense of one company, one brand,” he said.

“Our new state-of-the-art workspace is designed to empower employees to do their best work for clients within a highly collaborative and interactive environment.”

However it was just last week that the year’s largest office leasing deal was announced, with institutional firm Investa Property Group securing a 10-year extension on an 11,973sqm lease to the federal government, at 836 Wellington Street.

Managing director of tenant advocacy group Acorpp, Justin Boelen, told the CoreNet Global event the volume of enquiry in his business in the past 12 months had been the highest since the peak of the resources boom in 2012.

“There is a lot of activity and people looking, but transaction time is definitely taking longer,” Mr Boelen said.

“However, the long-term view is quite optimistic.

“Business is starting to look beyond the cycle with a view of going forward rather than containment.”

At the northern end of the CBD, tenants are starting to move into one of the city’s most prominent vacant locations – Kings Square.

Construction contractor John Holland has taken up two floors in KS3, while fellow CIMIC Group subsidiary Thiess has become the first office tenant at KS1, taking one floor in the building.

Leasing at Kings Square is being handled by Sheffield Property Group, with managing director Digby Sutherland predicting an anchor tenant for the 23,156sqm KS1 would be secured in 2017.

“There are lots of leases that are expiring at the end of next year and the first two quarters of 2018, so they will make their decisions roughly 12 months out,” Mr Sutherland said.

“They’re in a good position, because fortunately for the tenants, it’s a pretty good market.”

However, despite the vast amounts of vacant space on the market, Mr Sutherland said options were limited for firms needing more than 5,000sqm, like Telstra, Inpex or Westpac, all of which are known to be looking for new addresses.

“Most companies who need 5,000sqm-plus, they are either national firms or global firms who expect a certain quality of accommodation, so its commensurate with what they’ve got on the east coast,” Mr Sutherland said.

“Although we have a high vacancy rate and there are lots of options, if you are a one or two-floor tenant, if you’re looking for 5,000sqm-plus in the next 12 months, you have very few options.”

Mr Sutherland said he expected further traction at Kings Square once Yagan Square was completed and the King Street connection to Northbridge was opened, both scheduled for midway through next year.

“You can really see how the whole precinct is coming together and by the middle of next year, it will be a fantastic precinct,” he said.

“I think all the tenants we have got earmarked for KS1 will all be moving in then, so timing is about spot on.”