Confidence is growing among developers with a view to new office construction as the outlook for Perth’s office market moves into positive territory for the first time in several years.
Confidence is growing among developers with a view to new office construction as the outlook for Perth’s office market moves into positive territory for the first time in several years.
Confidence is growing among developers with a view to new office construction as the outlook for Perth’s office market moves into positive territory for the first time in several years.
With a number of large tenants expected to come onto the market in 2007 and vacancy rates starting to fall, analysts are warning that large spaces will not be available for tenants wishing to move, creating the need for new office space.
Westpac director of property markets Frank Allen said a tightening of the market would initially result in a reduction of incentives rather than an increase of rent.
“We are forecasting a drop in incentives from 30 to 24 per cent by the end of 2007,” he said.
“Some building owners may feel more confident and drop incentives further or increase rents due to confidence in the WA economy, but it will be a question of how bold owners are in testing tenants.”
Mr Allen said several projects were expected to start this year for a finish in 2007.
“Every developer believes they have the best building in town, and although we will see a couple of starts this year, the level of construction will remain quite low,” he told WA Business News.
Recent Property Council figures show net absorption over the past 12 months was 45,000 square meters.
Mr Allen said his own research had found that nearly 18,000sq m of that was taken up by the mining and agriculture sector, 9,000sq m by the business services and property sector, and about 8,000sq m by the State Government.
Jones Lang LaSalle director of office leasing Nick Van Helden said there was very little A-grade stock available in the CBD and West Perth, and that rents were likely to increase as a consequence.
“Tenants need to be thinking ahead about their ability to grow in their current space or planning ahead to move,” Mr Van Helden said.
“Tenants will need option periods to secure an ability to grow, and other tenants will be pushed out as a result. Agents are analysing buildings to accommodate bigger tenants, and if tenants don’t secure their leases early they may lose out.
“Some of the big tenants that are coming out in 2007 are actively looking on the market now, and they need to.”
Possible new starts in the office leasing market include City Square, 100 St Georges Terrace, 464 Murray Street and Raine Square.