21/07/2020 - 12:00

Tightening supply to bolster office market

21/07/2020 - 12:00

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CBRE’s latest office report has highlighted how minimal new office supply entering the Perth market could help shelter it from the brunt of COVID-19.

CBRE said Perth’s office sector was in a relatively favourable position in comparison to high supply pipelines in Sydney and Melbourne. Photo: Gabriel Oliveira

CBRE’s latest office report has highlighted how minimal new office supply entering the Perth market could help shelter it from the brunt of COVID-19.

The CBRE MarketView Snapshot compared future office supply across the country, finding Perth had one of the lowest forecasted new supply pipelines for 2022 and 2023.

Upcoming office developments in Perth’s CBD includes AAIG’s $140 million plans for Capital Square, which were approved earlier this year, featuring an 18-storey and 32-storey tower comprising office, hotel and restaurant uses.

CBRE senior director of office leasing Andrew Denny said Perth’s office sector was in a relatively favourable position in comparison to high supply pipelines in Sydney and Melbourne.

“Perth’s office markets are likely to perform better than the major eastern states markets given our high exposure to the strongly performing mining sector and low exposure to the under-pressure education, tourism and hospitality sectors,” Mr Denny said.

“There has been surprisingly strong leasing activity, with good new enquiry, high levels of inspections, and a healthy level of negotiations occurring. This has been evident from the start of June onwards with activity accelerating through June.

“This surge though may be a reflection of enquiry and negotiations that were put on hold during the main Perth COVID-19 period, now entering the market, and may not be sustainable moving into 2021.”

Mr Denny said a key indicator for the future health of the leasing market was the level of subleasing space available.

CBD sublease availability increased from 29,900 square metres to 38,000sqm during Q2 according to CBRE, representing a 27 per cent increase in sublease availability.

“Although it is early days, at this stage this is only a relatively moderate increase in absolute sqm and not one for concern. By comparison, peak sublease post-resources boom was 100,000sqm in December 2015,” Mr Denny said.

Overall, CBRE found occupancy in Perth’s CBD office buildings were nearing 60-65 per cent with most tenants having returned to the workplace.

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