Woodside take-up drives CBD demand

Perth’s CBD has experienced the highest growth in demand for office space of any capital city since July 1995, according to the Property Council of Australia’s Office Market Report for July 1 2004.

And a net absorption of 26,000 square metres over the past six months provides a promising outlook for the Perth market, which has struggled over the last few years and has the highest total vacancy rate nationally.

The biannual office market report is collated through data provided by commercial agents and is considered the benchmark by which to measure office vacancy rates.

Although the vacancy rate increased in the past six months from 12.2 per cent to 13.9 per cent, Property Council executive director Joe Lenzo said the figure was very positive.

“The figure six months ago did not include the supply addition of the Woodside Building, so although the vacancy rate has gone up, for the first time in seven years there has been an increase in the amount of space taken up in the CBD,” he said.

The Woodside building is responsible for 46,640sq m of the 62,490sq m of supply additions to the market in the past six months.

Before the Woodside take-up, no additions over 15,000sq m in a six-month period had occurred since the July 1992 market report.

Mr Lenzo said the result of the office market report offered promise for the industry.

“After three flat or down years in office demand, we anticipate that this six-month period signals new growth in the Perth CBD market,” he said.

“I believe we can legitimately forecast that the vacancy rate will go down over the next six to 12 months.”

Mr Lenzo said it was not one-off big deals driving demand in Perth, but rather an up-take of space by existing tenants, particularly in resources, engineering and a smaller contribution from the legal sector.

“We are now optimistic that, in the medium term, the resource and engineering sectors will underpin a stronger commercial office sector in WA, which translates into more employment and wealth in our community,” he said.

“It is pleasing to see strength in underlying demand counteracting the trends of interstate consolidation and corporate downsizing evident in recent years.”

CB Richard Ellis research manager Andrew Woodley Page expects Perth’s vacancy rate will return to its “equilibrium” of 10 per cent by 2007.

“It is superficial to just look at the rise in total vacancy. The net absorption figure is the main thing that tells the story of where the market is at, and it is very positive,” Mr Woodley-Page said.

He forecast an annual net absorption of between 15,000 and 20,000sq m up to 2007, taking into account new space being made available by the Ernst and Young Building (11,450sq m), Allendale 2 (7,200sq m) and the proposals for City Square stage 1 (14,500sq m).

“The market has turned a corner and is looking positive,” Mr Woodley-Page said.

Knight Frank State director of asset services, Ian Edwards, said while the Property Council figures reflected historical trends, Knight Frank’s own research, which predicts future trends, indicated an improving market.

“Our figure takes into account any future deals, movements and buildings coming online, and is currently at 17.5 per cent,” he told WA Business News.

Perth’s other major office market, West Perth, experienced a decreased vacancy rate for the six-month period, moving from 8.1 per cent to 7.8 per cent.

Mr Lenzo said  a total vacancy figure of 27,637sq m indicated lots of smaller space rather than any significant single holdings.