With office space on Perth’s city fringe in high demand, the Herdsman Business Park is experiencing a development boom with six office projects expected to come on-line next year.
With office space on Perth’s city fringe in high demand, the Herdsman Business Park is experiencing a development boom with six office projects expected to come on-line next year.
Just eight minutes drive from the Perth CBD and close to Glendalough train station, Herdsman has over 100,000 square metres of office stock, a bulk of which is taken up by the Garden Office Park, West Australian Newspapers, Dale Alcock Homes and the Lotteries Commission.
What large parcels of developable land that are left have been snapped up in recent months by developers, buoyed by the relatively quick construction timetables on modest office projects and rising tenant demand.
Picking up a 2,500sq m lot at 67 Walters Drive, construction giant BGC is making the most of the site with a nine-storey, 6,228sq m office complex.
The complex will boast 230 car bays and claim the title of the tallest building in the area when complete in February 2008.
Macquarie Bank and the Alcock Brown-Neaves Group beat three parties in July this year to secure a 9,500sq m former plant nursery site at 133 Hasler Road for $16.5 million off-market.
ABN is about to begin construction of a three-level, 2,500sq m office building without a pre-commitment. It expects to complete the project next year.
The joint venture partners intend to build two other office blocks on the site, each with more than 5,000sq m of space, by mid-2009.
Meanwhile, development group Primewest is building a four-storey office at 71 Walters Drive comprising 3,750sq m of space.
Due to be completed in April next year, the building will have a ground floor coffee shop, undercover car park and three upper levels of office space with large 1250sqm floor plates.
Primewest is also building a new Lexus dealership at 359 Scarborough Beach Road in Osborne Park.
Other office projects under way include the refurbishment of 40 Hasler Road from warehouse to office (2,000sq m), 76 Hasler Road (2,250sq m) and 23 Walters Drive (1,000sq m).
According to a recent report by Jones Lang LaSalle, Herdsman will reach close to 140,000sq m of office stock by the time these projects are completed in early 2009.
Jones Lang LaSalle WA research analyst, Andrew Bouhlas, said despite the construction of new space, Herdsman’s vacancy rate may continue to tighten below four per cent next year off the back of record low vacancies in the CBD and West Perth.
Rents in Herdsman were currently in the order of $320/sq m to $350/sq m and could keep rising, he said.
“If tenants get desperate and they see things are happening in Herdsman, by the time these projects are complete, most will be committed.”
CB Richard Ellis senior director office service Andrew Denny said the next wave of office stock in the area would lease for more than $350/sq m, as construction costs were currently rising at one per cent a month and developers would pass any costs onto tenants.
CBRE is currently leasing 67 Walters Drive for BGC for more than $300/sq m.
“We saw a strong surge in interest in the project some months ago before it went quiet. We’re now seeing the surge again with the large increase in rents in West Perth and Perth…it’s incredible that tenants are so slow to take advantage of the situation,” he said.
Jones Lang LaSalle negotiator sales and investment, Phillip Fogliani, said rents in the order of $375/sq m to $400/sq m in Herdsman next year were not out of the question.
Mr Fogliani said there was also high demand for land and very few sites available.
“There are only a few small parcels of land left, which have potential if you take a leaf out of BGC’s book and build up. Parking is becoming quite an impost for developers though with the council imposing a one bay per 27sq m of gross office area planning condition,” he said.
Other recent sales in the vicinity include 15 Walters Drive, which sold in March 2007 for $1.33 million or $2,032/sq m, and the Ikea site on Scarborough Beach Road, which was picked up by Araluen Golf Club Resort-owner Jacky Mulani for $19.9 million.
