Perth remains among the most expensive in the world for office accommodation, however, a new research report released by DTZ has forecast a decline in occupancy costs in the year ahead.
Perth remains among the most expensive in the world for office accommodation, however, a new research report released by DTZ has forecast a decline in occupancy costs in the year ahead.
DTZ's 12th annual Global Occupancy Costs - Offices research report is a guide to total occupancy costs across 114 business districts in 49 countries and territories worldwide.
The research shows that six Australian cities, including Perth, are among the world's 100 most expensive.
Sydney is Australia's most expensive city, bolstering its global ranking to 40 (up from 46 in 2008).
Perth was one of the biggest movers, jumping a considerable 19 points from rank 62 in 2008 to 43 in
2009 - well ahead of major cities such as Chicago and Shanghai, and just three rungs behind Sydney.
Brisbane is ranked 46, followed by Melbourne (86), Canberra (95) and Adelaide, which just made it into the top 100 rankings at number 97.
DTZ's national research director, David Green-Morgan, said the research has forecast a decline in
office occupancy costs around the globe, amid fears of a long global economic downturn.
"[Last year] was a mixed year for Australian office markets, with the first half of the year characterised by strong rental growth across all markets, on par with that seen in 2006 and 2007," Mr Green-Morgan said.
"However, by the middle of the year the slowing economy started to weigh on the office market and growth ground to a halt.
"As we move into 2009, incentives are increasing rapidly and there is a strong probability that face rents will decline in all CBD markets in the year ahead, with Perth and Brisbane at risk of the biggest falls."
Brad Carey, joint managing director of DTZ Western Australia, said Perth was already showing signs of declining rents.
"Whilst Perth rents grew out of control during 2008, they do seem to have plateaued," Mr Carey said.
"In 2009 we will see more sub-leasing emerge and this will help soften rents in the medium term. This is likely the direct result of the volatile global economic climate and falling commodity prices, in a market which is very much driven by the resource sector."
Mr Carey said that as a result of increased rents and costs in 2008, and with businesses hyperconscious of cost savings amid current economic volatility, businesses were looking at ways of using their space more efficiently.
"This trend will further soften rents in the medium term due to the increase in real vacancy rates, which will occur earlier than previously expected," he said.
Mr Green-Morgan said sub-lease space would continue to rise as companies further rationalise staffing levels and look to drive costs down further.
"Recent GDP data shows that the economy has slowed rapidly since the middle of 2008 and CBD office markets in particular have felt the impact, with the finance and business service industries being hit the earliest and hardest during this downturn," he said.
"While we expect negative rental growth during 2009 and 2010, the lack of new supply should prove positive in the longer term for Australian office markets. That being said, we can expect vacancy rates to hit double figures in many markets as demand for space continues to deteriorate."
Mr Green-Morgan said the negative growth was forecast at a global level, with more than three quarters (78 per cent) of the 114 business districts surveyed globally expecting occupancy costs to fall in
2009.
"Only 3 per cent of the business districts are optimistic about an upturn in occupancy costs, while the remaining 19 per cent expect occupancy costs to remain stable," Mr Green-Morgan said.
"Similar sentiments are reflected in Asia Pacific, where 76 per cent of the markets surveyed expect office occupancy costs to decline while 24% expect occupancy costs to remain stable over the year."
