West Perth misses out

BOUYED by increased investor interest, back-in-vogue mining companies have been seeking out a piece of Perth’s commercial real estate.

However, the traditional stamping ground for mining companies, West Perth, is being overlooked in favour of a more central location.

This is one of the findings from the latest half-yearly Office Market Report compiled by the Property Council of Australia, which indicates central business district vacancy rates, including that of West Perth, fell by more than 1 per cent in the past six months to under 9.1 per cent. This is an improvement from the January 2002 CBD vacancy rate of 10.1 per cent.

Property Council executive director Joe Lenzo said the improved CBD market reflected moderate improvements in demand across most major business sectors.

But West Perth experienced a softening in demand for all grades except B grade, or those buildings with good quality space, a reasonable standard of finish, tenant car parking and a basic standard of technical services.

Across all grades, the West Perth vacancy rate rose from 8.72 per cent to 9.78 per cent. While the report indicated a positive property market, the net increase in demand for office space was a moderate 11,000 square metres.

Other reports released over the past month are more pessimistic, pointing to a subdued, flat or declining commercial property market.

According to a Jones Lang LaSalle first quarter Asia Pacific Property Digest, net absorption in the CBD office market was -8,400sq m over the first quarter as a result of downsizing, consolidation and a shift by some companies to suburban locations.

The flat office demand was also affecting rental growth. The Jones Lang LaSalle report showed that gross effective rents dropped 1.7 per cent to an average of $282sq m over the quarter.

Buyer demand also appears to have waned in the past two months. A monthly report by Australian Property Monitors into auction clearance rates indicates that interest rate rises and fears of interest rate increases were already starting to bite. Perth’s auction clearance rate took a dive in June at just 32 per cent, the lowest in the country and well short of Canberra’s clearance rate of 63 per cent.

A similar subdued story is unfolding in the domestic housing sector. Housing Industry of Australia WA executive director John Dastlik said it was clear that interest rates rises were having an immediate impact on the confidence of new home buyers.

“Interest rate stability is paramount to the health of Australia’s building industry,” Mr Dastlik said.

In all, 52,173 loans were approved in May 2002. Of these, 45,000 were for established dwellings, 1,496 for newly erected dwellings and 5,554 were for home constructions.

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