Perth's office market has experienced a complete shift in sentiment over the March quarter, with increased confidence in the local economy leading to a rebound in tenant demand for office space, according to new research.
Perth's office market has experienced a complete shift in sentiment over the March quarter, with increased confidence in the local economy leading to a rebound in tenant demand for office space, according to new research.
CB Richard Ellis' latest Perth Office Market View report showed the office vacancy rate in the CBD was likely to fall to around 6.5 per cent in July, as tenant demand accounts for new supply as well as backfill space.
The report said business services accournted for the vast majority of takeup, with resources companies taking the second largest amount of space.
CB Richard Ellis said further strong absorption was expected for the six months to July 2011, after the near-record absorption of 66,670 square metres of space seen for the year to January.
"That said, as new supply comes online in late 2011 and through 2012, some pressure will be seen on the vacancy rate, particularly for older, lower grade buildings," the report said.
"This big unknown at this point in time is whether the increasing tenant demand will be strong enough to take up much of the backfill space which will become available."
As a result of the decreasing vacancy, the report said, rental levels have begun to see positive growth trends, particularly for premium and A-grade stock.
The first increases in rental levels since mid-2009 were seen over the December 2010 quarter.
CB Richard Ellis predicted an annual rental growth rate of 4.2 per cent in the coming five-year outlook, well above national averages.
Meanwhile, CB Richard Ellis' report showed the West Perth office market is returning to low vacancies faster than the CBD, thanks to wide ranging tenant demand from small to medium resources firms.
As of January 2011, the West Perth vacancy rate was as low as 5.2 per cent, and researchers predicted it to fall to around 4 per cent by mid-2011.
CB Richard Ellis associate director of office services Luke Bray said rental levels were forecast to increase over the next 12 months, with $575 per square metre already achieved this year.
"As at March 2011, the indicative net face rent for West Perth was recorded as $500 a square metre, indicating the rental correction phase has truly come to an end," Mr Bray said.
"Rental levels are expected to continue increasing for the remainder of 2011 as the amount of available lease space remains limited and there is no new development scheduled for completion during the year.
"This means for tenants that are expanding or with lease expiries coming up in the next 12 months, they should start to plan well in advance to ensure they are not caught short."
Mr Bray said there were very few large areas of space currently available in West Perth, and the only tenancy over 1,000sqm was the 1,440sqm available at 2 Kings Park Road.
He said a total of around 11,170sqm was expected to come online during 2012.
"This supply will not be adequate to meet market demands over the coming year as investment in the resources sector fuels further demand as is expected," Mr Bray said.
"Current projects under construction include approximately 5,000 square metres at 1120 Hay Street and approximately 4,700 square metres at 100 Havelock Street. "
Perth's suburban office market held firm over the 12 months to March 2011 and confidence is returning, the report said.
But the supply pipeline for suburban office developments has softened in early 2011, and little new supply is likely to come on line this year or next.
"As vacancy continues to decline and new supply completions fall, rental growth should commence a positive trend once more as market conditions settle towards the end of the year," the report said.
