Perth CBD office vacancy rate could tighten to below 4% by end of 2013: Colliers International

The Perth CBD office market will continue to benefit from demand for space driven by companies tied to resources projects with the prospect that the vacancy rate could tighten to below 4% by the end of the year, according to Colliers International.

This compares with a national vacancy rate of 8.3%, expected to rise to 8.8% by January 2014.

The Perth market remains highly attractive to investors with premium net rents currently at $835 per square metre and A-grade gross office rents currently at $736 per square metre with yields at a healthy 8.5%.

A-Grade rents have risen 16% since December 2009 and are expected to increase slightly over the next six months.

Perth A-Grade net face rents exceed that of the Sydney core CBD, and remain well in advance of other Australian capitals.

“In dollar terms, Perth CBD is looking increasingly unaffordable with rents getting back up to levels not seen since the GFC,” says Nerida Conisbee, national director of research at Colliers International and author of the latest CBD Office Research & Forecast Report

“All things being equal, Colliers International expects CBD vacancy rates over the next six months to tighten to a mid-year estimate of slightly under 5% with the likelihood of further tightening to around 4.0% by the end of the year.

“However, if the mining sector rebounds as expected, this, together with the expected take-up by the oil and gas sector, could see the vacancy rate contract even further, though this depends on how quickly confidence and investment in the WA resource sector rebounds in 2013.

“The ongoing issue of tight supply, high rents and low vacancies adds further impetus to the need for near-city suburban office development,” she says.

The most recent Property Council of Australia’s (PCA) Office Market Report for the second half of 2012 found that the office vacancy rate for the Perth CBD increased from 4.2% to 5.7% due to decreased demand for commercial office accommodation but also due to a record increase in new office space being completed.

There was 180,000 square metres of new office space added to the Perth CBD over 2012, but only 12,249 square metres of space is forecast to be over 2013.

The tightest Perth market is the premium grade market, which had a vacancy rate of 4.5% as of January 2013, according to the PCA.

From 2014 onwards the new office pipeline will gradually increase again.

Demand for office space will also be impacted by a growing urban population - the population of the greater Perth urban area is expected to grow by more than 35% by 2026, with the residential population of Perth city expected to reach nearly 50,000 over the same period.