Perth's rental office market evens out: HTW commercial
To date in 2019, the Perth office leasing market has seen both rental incentives and rental rates stabilise, according to the latest report from Herron Todd White.
The most recent Property Council of Australia (PCA) Office Market Report indicates the total vacancy rate for office space in the Perth CBD dropped marginally from 18.5% to 18.4% in the six months to July 2019.
The reduction is attributed to positive demand for premium and B-grade buildings.
The property valuation firm found, whilst it's an encouraging sign, Perth’s CBD has the highest vacancy rate of all capital cities in Australia.
There are no significant building projects in the pipeline until 2020 and the revitalisation of the CBD landscape, with major infrastructure projects such as Elizabeth Quay continuing to move ahead.
The report noted, "incentives for quality buildings in Perth’s core CBD have even experienced some downward pressure with early signs of growth in the space needs of particular tenants."
"Property owners continue to be proactive in trying to entice existing tenants to recommit and in order to attract new tenants."
"Accordingly, incentives are still being offered in the market place (typically between 25 and 50%). Furthermore, landlords are providing their existing and prospective tenants with bespoke floor plates, flexible work spaces, meeting hubs, refurbished foyers, some featuring concierge services, gymnasiums or wellness centres with some more innovative landlords looking at child care or child minding facilities within their buildings, in addition to the obligatory end of trip facilities, bike storage rooms and, in some cases, bike repair shops," the report stated.
In terms of capital transactions, demand for office property in the Perth CBD has been felt predominantly from institutions and foreign (south-east Asian) buyers seeking counter-cyclical acquisitions of secondary assets with good prospects for re-positioning.
The West Perth office market has not fared as well as the CBD for the six months to July 2019 as the total vacancy rate rose from 14.8% to 16.9%.
Similar to the Perth CBD however, vacancy rates for A-grade space actually tightened during this period however this was off-set by a substantial increase in vacancies for lower grade premises.
The authors said, "the total vacancy rate for office space in the Perth CBD dropped marginally from 18.5% to 18.4% in the six months to July 2019."
"The lack of quality office stock with medium to long term WALEs combined with subdued economic conditions has affected transaction activity. We expect these trends to continue in the short term," they concluded.