A recent office leasing deal at Exchange Tower has illustrated the lengths to which landlords are going to attract tenants, as vacancies continue to rise across the CBD.
A recent office leasing deal at Exchange Tower has illustrated the lengths to which landlords are going to attract tenants, as vacancies continue to rise across the CBD.
Early last month, accounting firm Moore Stephens Perth signed up for a 10-year lease over the entire 15th floor of the Exchange Tower, which has recently undergone a complete refurbishment.
The 1,500-square metre deal was brokered by commercial agency Knight Frank Australia director Ian Edwards, who described the move as a major step up for the firm, which was previously located at Grosvenor House.
While Mr Edwards would not be drawn on specific financials of the deal, other sources told Business News the accounting firm would not have to pay rent for five years, its outgoings were capped, while it will only pay about $550 per square metre after the rent-free period ends.
Business News understands a high quality fit-out is also part of the deal.
Other recent upgrades at Exchange Tower, which was rebranded earlier this year having formerly been known as Exchange Plaza, included new end-of-trip facilities, a tenants-only lounge, and a concierge service providing access to everything from bicycle mechanics to masseurs.
The new facilities are designed to bring the building up to standard, following the loss of two major tenants – law firm Ashurst and the Australian Securities Exchange (ASX), during 2015.
Mr Edwards said current market conditions, with Knight Frank expecting vacancies to peak at around 22 per cent next year, meant landlords had to consider drastic measures to sign up tenants.
“They have to discount their rent, they have to pay for a fit-out and they have to be very flexible,” he said.
Mr Edwards said while there was around 300,000sqm of office space empty in the Perth CBD, only half of that would be attractive to tenants. He estimated the vacancy to be about 10 per cent in higher-grade buildings, while tenants with large space requirements would battle to find an option.
“It’s very hard to get good quality space above 5,000sqm,” Mr Edwards told Business News.
“There are some choices but they’re getting very few and far between.”
The next 12 months are shaping up to be an interesting period for Perth’s CBD office market, with much of the vacant space from the recent construction boom expected to be swallowed up, leaving vacancies in older buildings.
Telstra is expected to seek a new headquarters next year, potentially moving out of its Stirling Street home, while Leighton Contractors has been tipped to shift to the vacant Kings Square 1 building, which its parent company, Leighton Properties, has developed.
Business News understands Leighton recently probed the market to find a tenant to take its space at Workzone, in Northbridge.
