Perth's already oversupplied commercial property market is set to swell to peak levels if oil and gas giant Woodside signs up as the anchor tenant for a planned new CBD office tower.
That’s the finding of property forecasting company BIS Shrapnel after it examined Perth’s inner city market, with almost 160,000 square metres of refurbished or new office space due for completion over the next calendar year.
If Woodside becomes the drawcard for a 55,000 square metre office tower at 98 Mounts Bay Road, the CBD vacancy rate will peak at a whopping 23 per cent in 2018.
And the vacancy rate will likely stay in double digits until at least 2021 if Chevron pushes ahead with another major office building of about 70,000 square metres at Elizabeth Quay around the end of this decade.
While almost two thirds of the space to be created next year has already been snapped up, these tenants will create a void behind them as they relocate from their current buildings.
Accordingly, BIS Shrapnel has forecast flat to negative net absorption of CBD office space between now and 2018.
“There will not be anywhere near enough demand to absorb all the office space due to come onto the market,” the company said.
“The Perth CBD office market does not need more major office developments.
“Even if Woodside and Chevron elect not to underwrite their respective office towers, it will take the CBD office market until the end of the decade to recover from the oversupply created by projects already locked in.”
Senior project manager Lee Walker said resources sector investment – a key driver of jobs growth, including office employment – had only just begun to slump.
Engineering construction in WA is expected to fall by about 30 per cent by mid-2018 as the current round of resources projects reach completion.
The CBD vacancy rate is currently about 14 per cent, double what it was 18 months ago, sending rents south.
BIS Shrapnel expects that by June 2018, higher leasing incentives will slash net effective rental rates by 45 per cent.