Six months ago, market speculation suggested office rents in Perth's CBD would hit $1,000 per square metre sometime this calendar year.
Six months ago, market speculation suggested office rents in Perth's CBD would hit $1,000 per square metre sometime this calendar year.
The likelihood of that figure being reached in the latter half of 2008 is increasing, according to some leasing agents, with the city's latest major deal overtaking the previous record for prime space.
The site in question - a 500sqm half-floor in Exchange Plaza - was signed for $900/sqm from July 1, well above the market rate of about $850/sqm.
Currently, rents for A-grade stock range from about $725/sqm to $850/sqm.
Knight Frank director Ian Edwards said he believed prime rents could reach $1,000/sqm this year, due to the general shortage of office space.
However, he said the increase was not sustainable, particularly when tenants started relocating to new buildings.
"We expect that, by the end of 2010, rents will start plateauing, and by 2012 they'll start falling," Mr Edwards said.
Meanwhile, new office space on the CBD's fringe is being secured at much lower rents.
Government agency Medicare is believed to have signed on to 5,000sqm of A-grade space at Charter Hall's 130 Stirling Street project, at a rent of $450/sqm.
Medicare, which is expected to move its state headquarters to the new location, is currently based in the BankWest tower.
It will join Police & Nurses Credit Society, which committed to 4,100sqm of space in the building earlier this year.
Medicare's deal is still below rents in other fringe areas like Subiaco and West Perth, where prices have reached $550/sqm and more than $600/sqm, respectively.
For those CBD tenants yet to arrange similar pre-commitments, there are several factors that may force them to accept higher rents, according to Colliers International (WA) office leasing director, Ian Campbell.
"The cost involved in relocating [is a factor], and some tenants won't have an option if their lease is up for expiry," Mr Campbell said.
With most new buildings already pre-committed, at least with anchor tenants, the options for those left in the market are reduced.
A small pocket of space remains in Century City - future home to NAB and Japanese oil and gas giant Inpex - after financial services firm Plan B ended negotiations over a lease for nearly 2,500sqm in the building.
The remaining area has been signed by Apache Energy and the National Offshore Petroleum Safety Authority.
However, the best bet for prospective tenants may be a second round of new developments, due to commence soon, which are between 12 months and two years from completion.
These include Finbar's office tower on the old Fairlanes Bowling site and Queensland-based First State Developments' 13,000sqm development at 226 Adelaide Terrace.
WA Business News understands a lease for 4,500sqm of space in the latter building is being finalised, for around $600/sqm.
On Hay Street, a proposed 13,000sqm office tower at number 905, to be built by Stamford Land Corporation subsidiary, Knoxville Group Ltd, is believed to be close to securing a building licence.
However, other projects have taken longer to come to fruition.
Griffin Group is still preparing its plans for a 24,000sqm office building on the City Square site, next to the BHP Billiton-anchored tower.
A development application for 60,000sqm of space at Capital Square, the joint venture between Saville and Babcock & Brown, is also yet to be submitted amid speculation the project has been shelved.
