Almost one fifth of Perth’s office space is now sitting empty and vacancy rates are tipped to get worse with several new complexes coming online.
During the height of the mining boom it was virtually impossible to snag an office in the CBD, but with mining off the boil, the building projects started to meet that demand are now almost ready for a very different market.
Leasing agent Jones Lang LaSalle (JLL) has released its latest figures on the office space market, revealing the vacancy rate in Perth’s CBD is now the highest it has been since 1995.
JLL’s WA managing director John Williams said the figures were driven by lowering demand and increasing supply.
“We have a 19.6 per cent vacancy rate in the Perth CBD, so that is the highest since the 1990s and our forecasts are for it to get to 24 per cent … in the first quarter of 2016,” he said.
“The main difference between the 19 and the 24 is the final completions of the new developments under construction at the moment.”
Around 75 per cent of the stock in Perth’s CBD, which was taken up during the boom, has now been handed back to the market since the global financial crisis, as businesses have downsized.
The slowing demand has coincided with increased supply from several new buildings which has caused rents to plummet by as much as 40 per cent over the past two years.
But industry insiders said there was an upside because the Australian dollar had fallen at the same time.
Peter Agostino, senior managing director with commercial real estate company CBRE, said that was making Perth more attractive to overseas buyers.
“Undoubtedly the 25 per cent odd fall in the value of the Australian dollar has seen us become an even more desirable and attractive destination,” he said.
“We have seen quite a significant kick in the level of foreign investment in 2015.”
With Perth unlikely to need any new major developments in the near future, developers are looking elsewhere for growth.
Some were tipping retailers to generate the next wave of projects with several suburban shopping complexes in Karrinyup, Innaloo, and Mandurah expected to undergo refurbishment.
Brookfield multiplex regional managing director and president of the WA Property Council Chris Palandri said those tenders were set to hit the market.
“We are seeing the retail spend come, there are some big projects on the drawing board, it will be interesting to see how quickly they get off,” he said.
“All those tenders are coming, for those projects, Karrinyup, Mandurah shopping centre and Westfield are looking closely at Innaloo and the like.”