Policy solutions needed to counter CBD dark zones

Policy solutions needed to counter CBD dark zones
Policy solutions needed to counter CBD dark zones


The high vacancy rate for older commercial buildings in Perth is a concern for the broader community and the Property Council of Australia is calling on the major parties contesting the state election to take a bigger interest in policy solutions to problem.

The Perth CBD has the highest vacancy rate in the country at 22.5 percent and much of the vacancy is in older buildings known as ‘B grade’ stock, which makes up almost a third of the total stock of commercial offices in the CBD. 

The vacancy rate for B grade buildings is over 30 percent.

The risk in Perth is that commercial tenants will continue to gravitate to the newer higher grade office towers leaving the older buildings vacant, creating ‘dark zones’ in the CBD.

A two-tier office market is emerging in the CBD, including prime and A grade buildings in stronger demand by tenants and older buildings. 

We are already seeing vacancy rates in prime buildings decline however vacancies in older buildings may not have peaked yet.

In a bid to tackle, the rising Perth vacancy rates, the Property Council is calling on the major parties contesting the State election in March to commit to working alongside industry and the City of Perth to enable building upgrade agreements in the CBD.

Building upgrade finance is a voluntary mechanism to assist building owners to upgrade commercial buildings to improve, water, energy, and environmental efficiency by retrofitting existing commercial buildings.

Under the Building Upgrade Finance mechanism, a local council can voluntarily enter into a building upgrade agreement with a building owner and a financier.

Under a building upgrade agreement the building owner agrees to undertake upgrade works in respect of their building. The financier agrees to advance money to the building owner for funding the upgrade works, and the council agrees to levy a building upgrade charge against the land on which the building is situated. 

The initiative has been successfully adopted in Victoria, NSW and SA. However, it will require a change of the Local Government Act to enable building upgrade agreements to commence in WA.

Building Upgrade Agreements are a simple and effective mechanism to overcome the high office vacancy rate in the CBD and prevent the spread of dark zones

Lino Iacomella is executive directory, Property Council WA, and can be contacted here.

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