Rate hits three-year low as momentum gathers
AUSTRALIAN FINANCIAL REVIEW
Thursday 7 February
The Perth CBD office vacancy rate fell to a more than three-year low in the six months to January, but still remains the highest in the country at 18.5 per cent.
Vacancies fell 90 basis points over the six months as 6752 square metres of office space was soaked up by tenants in the CBD, according to the latest Office Market Report by the Property Council of Australia.
This was more than double the 40 basis point improvement in the vacancy rate in the previous six-month period, a sign of a pick-up in momentum, according to Property Council WA executive director Sandra Brewer. ‘‘When you consider there is no new office space officially in the pipeline for the Perth CBD after 2019, and business and economic sentiment is once again lifting, the signs for the office market and the broader industry are encouraging,’’ Ms Brewer said.
The last time the Perth vacancy rate fell below 19 per cent was in July 2015. Vacancies peaked in the current downturn at 22.5 per cent in the six months to January 2017.
Among the deals struck over the past six months, Dexus negotiated a 8495-square-metre leasing deal with the federal government at its King Square precinct in the centre of Perth.
Improving sentiment about the Perth office market generated $1 billion in transactions last year with investors sensing an opportunity to buy into the market near the bottom.
Among them, fund manager Quintessential Equity paid $9.25 million for 8 St Georges Terrace, a vacant eight level building that US private equity giant Blackstone bought for $24 million in July 2013.
Daniel Taylor, Colliers International director of office leasing, said market conditions in 2019 would continue to favour Perth office tenants seeking competitive terms for office leases.
‘‘The overall CBD vacancy is slowly coming down but with 130,000sq m of vacant A-grade office space and 150,000sq m of vacant B-grade space, there’s still a way to go,’’ he said.
Nick Van Helden, head of office leasing in WA for JLL, said net absorption over the past 12 months had totalled 51,000sq m, the highest annual figure since 2011. ‘‘Rents continued to recover, with growth of 0.4 per cent recorded over the fourth quarter of 2018,’’ he said.