More than 10 per cent of office buildings in Perth’s CBD are completely empty, while 29 buildings have more than 5,000 square metres available for lease, according to new research.
More than 10 per cent of office buildings in Perth’s CBD are completely empty, while 29 buildings have more than 5,000 square metres available for lease, according to new research.
Y Research’s Perth CBD Office Tenant Census showed more than half of the 278 office buildings in the CBD have a vacancy, bringing the total vacancy rate to 22.1 per cent, or just less than 400,000 square metres.
That vacancy rate represents more than 10,000 fewer office workers in the CBD since 2012, while at the same time more than 170,000sqm of new office stock was brought to market.
The largest contributing factor to the rising vacancies in Perth offices, other than the rollout of new space, was the slowdown in the iron ore and engineering sectors, both of which have decreased their office footprint by around 40 per cent, or a collective 150,000sqm, since 2012.
Y Research chief problem solver Damian Stone said that, after a decade of Perth being an iron ore capital, oil and gas companies were now the biggest non-government space eaters in the CBD.
Mr Stone said oil and gas producers, such as Chevron or Inpex, were the players most likely to underpin new office development in Perth.
Also, the only significant office project currently under construction in Perth is Woodside Petroleum’s new headquarters at Capital Square.
But Mr Stone said oil and gas companies were likely at their peak for office requirements and could not be relied on for short-term growth.
Instead, Mr Stone said the education sector was looming as a silver bullet for Perth’s office market.
“Since 2012, education providers have been the standout sector in terms of improved office space occupancy, collectively occupying nearly 40 per cent more CBD office space,” Mr Stone said.
Business News understands the Department of Education is examining the possibility of establishing a primary school in the CBD, in response to high demand for spaces at schools in surrounding suburbs and the continued rollout of inner-city residential projects.
While discussions with agents remain in the preliminary stages, the department is understood to have a shortlist of potential buildings that could house a primary school.
Other emerging sectors include medical, technology and serviced offices, however Mr Stone said demand from those industries would fall short of offsetting the vacant space coming back to market as a result of resource-related downsizing.
“To get that 22 per cent vacancy rate down, we need to take out over 100,000sqm of older buildings,” he said.
“We can convert them for education, we can convert them for tourism or residential, but the issue is we can’t control the demand side.
“We need stability in commodity prices to allow resources companies to transition from cost-cutting survival to being confident enough to invest in new projects, take on more staff and ultimately take on more property.”
