This article is from the Australian Property Journal archive
A HIATUS of new supply through 2017 and 2018 with allow Perth’s CBD office market to absorb its current high vacancy levels, according to Knight Frank’s Perth CBD Office Report.
The research shows 30,582sqm of new space was added in the first eight months of 2016, following on from more than 113,000sqm in late 2015.
However, very little new stock is forecast for 2017-18, with the only building that is 100% pre-committed is Capital Square for Woodside, which will add 48,484sqm when complete in mid-2018.
Knight Frank’s WA head of office leasing Greg McAlpine said the office market would remain very much a lessee’s market for 18 months with pressure on rents and incentives at 45-50 per cent of the net rent.
He said net absorption of space was negative for the first six months of 2016 and would remain soft for the balance of 2016 and through most of 2017.
“Leasing conditions are very favourable for tenants at the moment and will continue to see non-traditional CBD tenants venture into the city,” McAlpine said. “Developers are obviously very reluctant to commit to new projects in this environment so the majority of new space that reaches the market over the next few years will be refurbished lower grade space.”
CBD supply is heavily skewed to A and B-Grade stock, with B-Grade stock increasing each six monthly period and accounting for 35% of the total stock currently vacant.
McAlpine said this trend would continue as tenants took this opportunity to move into better quality space.
Knight Frank’s head of commercial and industrial sales, WA Todd Schaffer said four of the five significant sales in the CBD so far in 2016 had been to Asian buyers, including two to Chinese corporations, one to a Singapore-based fund manager and more recently the sale of an off-market building to a Hong Kong company.
He said the other major sale was to counter-cyclical, Perth-based fund manager Primewest, which bought a 50% stake in Exchange Tower.
“There is certainly a growing confidence in the investment market and we expect to see more sales activity through the balance of 2016 and into 2017,” Schaffer said. “The counter cyclical and offshore investors have acquired properties which seemingly represent good value and now other investors and funds will start to re-enter the market.”
Australian Property Journal
