Lengthy construction timetables in the CBD have led to an increase in the number of tenants seeking rentals in mid-sized office developments in West Perth and fringe city areas.
Lengthy construction timetables in the CBD have led to an increase in the number of tenants seeking rentals in mid-sized office developments in West Perth and fringe city areas.
At least five major developments in West Perth are understood to be either completely or majority leased, with most buildings expected to open for business over 2007-08.
The lure of West Perth has been building for some time, with Leighton Contractors and mining group MacMahon Holdings signing on late last year to anchor Pivot Group’s Parliament Place development and one of Harvey Norman’s proposed office buildings at City West, respectively.
It is not just the shorter construction periods on offer that have aroused interest from city tenants looking to move between three and 12 months out from lease expiry.
Also attractive are the savings on offer through early pre-commitment, ahead of the predicted price increase this year across all rent grades in existing city stock.
A case in point is patent attorneys Wray & Associates, which revealed in March that its move to a new development at 56 Ord Street instead of a new CBD office had saved the company around $40 per square metre.
Jones Lang LaSalle director of leasing Davis Evans said there was clearly some reluctance from tenants to pre-commit to office projects with long construction periods, to the extent the property industry had coined the term “pre-commitment resistance”.
“Tenants have been burned by false starts in the past, and they have a long memory…many are reluctant to let go of leases in case the projects are delayed,” he said.
Despite this risk, Mr Evans said that, in some cases, current pre-commitments were making it cheaper to lease a new building with completion set for 2009-10, rather than leasing existing stock.
Savills divisional director sales Chas Moore, an agent on the $500 million City West project, said based on the level of interest received in the West Perth development to date, he was confident more than 30,000sq m of office space in a second office tower could be leased within weeks.
The agency was in the process of talking to three interested parties and if given the green light, the second tower could be built by the end of 2008, he said.
“We’re doing the hard yards now and it’s really surprising the variety of tenants that are putting their hands up to move. This development really will be tenant driven.”
Mr Moore revealed Harvey Norman was considering building an office tower of up to 20 storeys with large 3,000sq m floor plates above its namesake store, if demand continued.
The 8,000sq m building for MacMahon on the Parry’s Carpet Warehouse site is expected to be completed by July next year.
