Commercial landlords in West Perth are coming under increasing pressure to retain tenants, as the near-city suburb’s office vacancy rate hits all-time highs.
That’s the main finding of a new report on West Perth office vacancies by Y Research, which showed the amount of vacant space in the suburb had increased by 43 per cent since 2013, with 20.4 per cent of offices currently empty.
The report covered 375 buildings in West Perth; with 46.6 per cent of those having some sort of vacancy, 25 of those having more than 1,000 square metres available, and 13.1 per cent completely empty.
Overall, there is more than 100,000sqm of office space available in West Perth, the report said.
Y Research chief problem solver Damian Stone said it was a big turn of fortune for what used to be a resources hot spot, where as recently as 10 years ago it was impossible to find even a single square metre of empty space.
“With the transition of the resources sector to the production phase there is nearly 100,000 square metres of vacancy in West Perth,” he said.
Mr Stone said the driving factor behind the increased vacancy was large tenants finding new premises, rather than a supply related issue similar to Perth’s CBD.
Major tenants to shift out of West Perth over the last three years include Allion Legal, Arup, Bentleys, Fugro, Leighton Holdings, Modec, Shadforth Financial Group, Snowden and WA Local Government Association.
Mr Stone said BP, Chevron, NEC, SinoSteel, St Barbara Gold and Technip had also downsized over the period, resulting in more than 2,200 fewer office workers in Perth since mid-2013.
The big issue for West Perth landlords, Mr Stone said, was that a host of other firms were considering relocations.
Business News reported earlier this week that Insurance Australia Group, West Perth’s second-largest office tenant, had appointed Savills to find a new home, while CBH Group has been known to be testing the market for quite some time.
WorleyParsons and accounting firm Grant Thornton are also known to be contemplating moves out of West Perth in the next 12 months.
Grant Thornton recently appointed CBRE to examine potential options in the office leasing market.
If those three firms shift, Mr Stone said that would add a further 24,000sqm of empty space to the West Perth market.
Mr Stone said those firms that had moved had generally upgraded their office accommodation while shifting to a CBD address.
“You can’t replace this level of vacancy from inside West Perth anymore,” he said.
“You would expect the trend to continue because city owners can offer better quality buildings and better quality amenity. In house cafes, end of trip facilities and in house gyms.”
Aside from slashing rents to attract a tenant, Mr Stone said building owners, particularly those with older properties, would have to start looking at conversion to residential, or demolition and redevelopment, likely to apartment product.
“If that happens, then West Perth becomes a dormitory suburb for city workers,” Mr Stone said.
“What that will do is add people back in, add vitality back in, so that supports the retail and makes it a better environment for West Perth tenants who remain.”
