21/10/2010 - 00:00

Two-speed market emerging for CBD offices

21/10/2010 - 00:00

Bookmark

Save articles for future reference.

OFFICE property analysts have noted a two-speed market emerging in Perth’s central business district, with vacancy rates spiking in the city’s eastern end and supply becoming tight along St Georges Terrace.

Two-speed market emerging for CBD offices

OFFICE property analysts have noted a two-speed market emerging in Perth’s central business district, with vacancy rates spiking in the city’s eastern end and supply becoming tight along St Georges Terrace.

Colliers International director of office leasing, Neil Kidd, said the vacancy rate in the CBD’s western end, west of Barrack Street, was less than half of the vacancy rate recorded down the eastern end of Adelaide Terrace.

“The options are running out very rapidly,” Mr Kidd told WA Business News.

“People are talking about a 10 per cent vacancy rate but the reality is that’s not what we’re talking about.

“We’re talking about 12-24 per cent on the eastern end and 6-7 per cent on the western end.

“At 6-7 per cent, that’s pretty tight, so the options for major expansion, rapid major expansion are diminishing rapidly.”

Mr Kidd said there were two factors driving the emergence of the two-tiered market; a flight to quality as the market stabilised over the past year, and major mining companies displaying a preference for the central to western end of the CBD.

“The major miners tend not to congregate down in the eastern sector, a little bit like how the mid-tier miners like to congregate up in West Perth,” he said.

“There is that aspect and there has been a flight to quality as the market has stabilised, and product has come into the market. Most of the absorption has occurred in the A-grade and premium markets, so I think it’s a combination of those two factors that’s tightened up supply in the western end of the CBD.”

The last time a similar situation emerged, Mr Kidd said, the Rydges Perth Hotel was created out of the former Department of Supply building.

Mr Kidd said he expected vacant office building owners to assess the viability of repositioning their assets to cater for a changing market.

“Some of that stuff could be retrofitted for residential, some of it could be retrofitted potentially for a hotel, and I think also we’ll see strip-outs and refurbishments,” he said.

“The opportunity is there for the market to reposition itself.

“It’s probably the most viable option for getting a hotel out of the ground,” he said.

“It’s a really tough ask to get a brand spanking new hotel out of the ground these days, and the more likely option if you’re going to go for it, because you’ve got the fabric of the building already there to work with, is to do a retrofit.”

 

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options