With only 7,000 square metres of office space remaining in the CBD and West Perth, and rents already passing $800 per square metre this year, property analysts expect developers will head for Perth’s fringe suburbs to boost office stock
With only 7,000 square metres of office space remaining in the CBD and West Perth, and rents already passing $800 per square metre this year, property analysts expect developers will head for Perth’s fringe suburbs to boost office stock.
Rents for premium space in the CBD hit $800/sqm in December, which was surpassed by a recently signed lease for $825/sqm lease in QV1.
A-grade stock in the CBD will also reach $800/sqm from April.
Knight Frank director of asset services Ian Edwards said rents would force many smaller tenants out of the CBD.
“2008 will probably be the fastest growing year for commercial rents that Perth has ever seen, because the bulk of new stock will not be on-line until mid to late 2009,” Mr Edwards said.
“We would expect rents to be knocking on $1,000/sqm for premium stock, which is a frightening proposition when a 1,000sqm area is going to cost $1 million a year in rent.”
Mr Edwards said businesses were still able to pre-commit to premium stock for $700/sqm, although rents were expected to rise over the course of the year.
He said if last year’s growth rate of 45 per cent was surpassed this year, rents for premium space would be expected to surpass $1,000/sqm by the end of 2008.
This, combined with a lack of land and low plot ratios in the CBD, is expected to force office development into suburbs such as Herdsman, Innaloo and Belmont.
Property Council of Australia policy and communications manager, Lino Iacomella, said Perth was following Sydney’s trend towards commercial development in outer suburbs.
“The confidence to build multi-level [10 storeys or more] buildings in places like Herdsman or Belmont wasn’t there in the past,” he said.
“But the CBD, West Perth and Subiaco are full, or filling up quickly, and as the city grows these suburban centres are relatively closer, and access has improved significantly.”
Mr Iacomella said development was being driven by businesses that would have traditionally operated from the CBD but were now looking for alternatives.
“They are proving to be quite interesting in terms of what is being built – the scale is quite large,” he said.
In Herdsman, about 100,000sqm of stock is currently available, with a further 50,000sqm expected to come on-line this year.
Jones Lang LaSalle WA research analyst Andrew Bouhlas said that, while very few developments had pre-committed tenants, the area would be appealing to smaller tenants squeezed out of the CBD.
Rents in Herdsman are currently fetching between $330/sqm and $350/sqm, and are expected to increase.
Plans for an office park in nearby Innaloo are also expected to kick off this year, following last month’s $65 million sale of the Fini family’s land parcel opposite the new Ikea store.
The park will be a staged development and will adjoin a smaller plot, where a 4,000sqm office building is being planned.
In Belmont, stage two of the Eastlink Office Park at 193 Great Eastern Highway will bring 3,105sqm of office space onto the market when completed next year.
The park is expected to attract rentals of about $350/sqm.
Other projects in Belmont include a 6,000sqm development at 175 Great Eastern Highway and a 6,000sqm project on Daley Street.
The 8,000sqm development at Perth Airport will also boost stock in the area, with the first stage (4,000sqm) fully leased for around $350/sqm and the second stage under construction.
A third building is contingent upon leasing performance of the second stage, which is one third committed.
The airport has attracted other tenants, with Rio Tinto announcing last month that it will build a remote operations centre on a 2ha site at the airport, for which it has signed a 10-year lease.
However, Jones Lang LaSalle’s Andrew Bouhlas said the airport precinct would require a significant amount of infrastructure, including transport links and cafes, before businesses would commit to the area.
Joondalup has also been touted as a potential area of office development, with extensions to the Lakeside shopping centre due to be completed this year.
Mr Edwards said suburban developments, usually being about 3,000 to 5,000sqm in size, would mainly cater for smaller tenants.
He said larger tenants that had not yet secured CBD stock would be in a difficult position.
“We’re really now at the point where most buildings over 10,000sqm are pre-committed to 2010, while for those around 5,000sqm, it’s still possible to pre-commit in the second half of 2009,” Mr Edwards told WA Business News.
About 95,000sqm of stock is expected to come on-line in the CBD by early 2009.
