Outlook bright for CBD offices: report
Source: WA Business News
24-May-11 by Dan Wilkie
Rental growth in Perth’s CBD office market is set to outperform the national average over the next five years, thanks to ongoing expansion in the resources sector, with forecasts tipping the vacancy rate to drop under five per cent by 2014.
CB Richard Ellis’ latest Perth Office MarketView report forecast CBD rental growth to average 4.2 per cent per year over the next five years, well above the national average of 3.9 per cent.
The growth will be underpinned by strong net absorption levels, tipped to average around 48,000 square metres per annum over the five-year period.
The previous five year average was just 18,262sqm, and the ten-year average is 17,585sqm.
Over the first quarter of the year, business services accounted for the largest take-up of space, followed closely by the mining and resources sector, CBRE senior director of office services Andrew Denny said.
Mr Denny said the Perth market had been flipped on its head compared to the first quarter in 2010.
“Increased confidence in the local economy has led the rebound in tenant demand for office space, particularly for expansion space,” Mr Denny said.
“This strong demand outlook is set to drive the CBD vacancy rate down significantly to around 5 per cent in 2014, which will drive rental growth.”
The report showed a quarter of a trillion dollars in resources projects were proceeding in WA, which is feeding significant growth in white collar employment and the strong net absorption in the Perth CBD.
In January the CBD vacancy rate fell to 9.5 per cent, and is tipped to slide to 6.5 per cent by July.
“The vacancy rate is expected to decline until mid-2012, when new supply completions may result in an increased amount of backfill space,” Mr Denny said.
“The big unknown is whether the increasing tenant demand will be enough to take up much of the backfill space that will be available.”
New developments in the CBD will deliver 140,000sqm of office space between now and the end of next year including the 73,500sqm City Square and 42,500sqm Raine Square developments.
With both of those buildings pre-committed, those developments are not expected to increase the available office accommodation stock.
A key issue over 2012, Mr Denny said, was how much space BHP Billiton would retain, thus lessening the supply of backfill space to the market in 2012.