Perth’s commercial leasing agents are warning the city’s office space crisis will intensify this year, potentially leaving companies no choice but to pre-commit to proposed office projects or stay put and face expensive lease renewals.
Perth’s commercial leasing agents are warning the city’s office space crisis will intensify this year, potentially leaving companies no choice but to pre-commit to proposed office projects or stay put and face expensive lease renewals.
There’s no respite on the city fringe either, with office space in critical short supply and high construction costs compounding the problem by causing many developers to hold-off office projects in search of pre-commitments.
And the situation is showing no signs of turning around any time soon, according to CB Richard Ellis senior director of office services, Andrew Denny, who believes the market is severely unbalanced and is forcing tenants into a difficult position.
“There’s nothing available in the CBD and very little difference in non-CBD areas. With the high vacancy rates of the past, people haven’t needed to pre-commit, but they’re more willing to do it now,” Mr Denny said. “I think we’ll see pre-commitments become an increasing part of the market this year.”
With only three major CBD office projects due for completion by late 2008, the lag time is of great concern to agents and tenants.
Some are tipping prime office rents to reach $600 a square metre by Christmas if relief is not found.
Colliers director of office leasing, Ian Campbell, said the situation could get worse if developers are met with delays.
“Organisations that can’t find what they want are looking to change their current office fit-outs, but even this is getting more and more difficult to do,” he said.
“The penny’s dropping in 2007.”
Companies with significant space requirements in the market at present include BHP Billiton ,with a request for between 45,000sq m to 50,000sq m, Macquarie Bank, with a request for 3,500sq m, and NAB, which has a requirement of about 9,000sq m.
However, NAB is believed to be close to signing on to the proposed Century City office project, under construction at 100 St Georges Terrace, while BHP Billiton is in similar discussions with Bishops See developers Multiplex and Hawaiian.
Mining heavyweight Rio Tinto is also in the market for office space, sending agents on a suburban hunt to find a location for a 1,200sq m operations centre and up to 600sq m of office space.
This is in addition to a separate office of between 2,500sq m and 5,000sq m in size, and space for 50 car-parking bays, all required by the beginning of 2008.
Rio is not the only company switching its focus to the city fringe, with mining contractor MacMahon signing on to anchor a proposed $40 million office tower at City West last year and construction giant Leighton deciding to switch its headquarters to Parliament Place, West Perth.
Mr Denny said there was a large number of property owners on the CBD fringe planning to submit development applications for office projects this year, but he warned a majority of the space would not be delivered to the market before midway through next year.
Of those planning large projects, Charter Hall is understood to be considering a 12,000sq m office complex on a development site adjoining the Hatch Building in Northbridge.
In West Perth, City West owner Harvey Norman is planning to build an office complex above its namesake store, providing between 12,000sq m and 20,000sq m of office space.
This is in addition to a larger, stand-alone tower near Scitech, the plans of which are currently under wraps.
Mr Campbell said tenants would find it difficult to locate a 1,000sq m single office floor on the city fringe this year and suggested the challenge for agents would be to convince companies to pre-commit, without the assurance of seeing the finished product.
