Feature Four | The Quintessential Network with CBRE’s James Phelan
Our series ‘The Quintessential Network’ celebrates the work of our Ecosystem partners and demonstrates the excellent outcomes that can be achieved through meaningful and lasting relationships.
For the fourth feature in the series of The Quintessential Network, we spoke with James Phelan, Director of Office Advisory and Transaction Services at CBRE, to get his take on Perth’s current commercial property market.
CBRE is Australia’s largest commercial real estate services company that provides solutions to property owners, investors and occupiers. Phelan is responsible for office leasing transactions throughout the Perth CBD and Fringe CBD markets. With twelve years of experience in the property market, he has extensive knowledge in all facets of property advisory and has been specialising in Perth’s office leasing space since 2016.
What is the status of the Perth commercial property market at the moment?
So far, 2021 has been very busy with an increase volume of enquiries and transactions happening in the city, which has resulted in tenants making quicker decisions. Luckily, the pandemic hasn’t impacted the WA market as much as other states, aside from delayed inspections and negotiations in parts. The vacancy rate has increased by around 2% during this period.
Right before COVID hit, commercial vacancy was trending downwards with rentals rising and incentives dropping at the prime end of the market. Encouragingly, in the last twelve weeks enquiry and transaction levels are back to where they were pre-COVID.
Why is Perth the toughest leasing market in the country?
Perth has the highest vacancy of all CBDs in Australia. As a result, it is the most competitive as tenants have a lot of options. Perth landlords are competing to secure tenants – thus need to work harder and provide more generous commercial terms, upfront refurbishment work, and incentives to secure tenants.
Perth doesn’t have the same level of stock withdrawals as Sydney and Melbourne. In these cities, there is a lot of infrastructure work and cramped stock (residential, offices) that developers can convert into other uses. In Perth, a lot of dated stock sits idle artificially keeping the office vacancy higher – a stronger residential market could influence the likelihood of dates stock being transformed into residential housing.
What kind of tenants are seeking out commercial property in Perth at the moment?
Current active tenants include Government, law firms, engineering firms (iron ore, gold, lithium, infrastructure), professional services, healthcare and cybersecurity. The oil and gas organisations are still slow and are not experiencing as much growth as other sectors.
The current diversity of demand in the Perth CBD is extremely encouraging.
How does Quintessential Equity’s building at 8 St Georges Terrace stack up compared to the rest of the market?
8 St Georges Terrace has been a huge success – on a pro-rata basis it is one of the most successful office buildings in the market. It is a top performer from both a vacancy reduction and deal value perspective.
QE’s upfront refurbishment works were market-leading at the time. It was the key to the leasing success of the building, as it provided agents with the best possible product to deliver the best outcomes. Before the refurbishment, the property could have been considered part of Perth’s dated stock that sat idle. QE took a risk with 8 St Georges Terrace as not many owners in the Perth market refurbish B-grade buildings.
In Perth, landlords are focusing on the well-being of their tenants by providing facilities like gyms, yoga and pilates studios. The current challenge for landlords going forward is creating an environment that encourage staff to go into the office rather than working remotely.
How do CBRE work with Quintessential?
Working with Quintessential has been a breath of fresh air. As new landlord to the market, their ideas, enthusiasm and skill is market leading for Perth and their attention to detail with regard to the asset positioning and leasing of 8 St Georges Tce is phenomenal. They are a demanding client and keep us on our toes, as we work towards the common goal of delivering leasing success to the asset.Back to all articles