west australian property market update 15 may 2023
Above – Red Sands Tavern and Accommodation Park. Image: Supplied.
  • Newman tavern hits the market, one of only two in the town
  • Several West Perth offices leased, and another listed
  • Could refurbishing older commercial assets be greener than building new?

In the latest for the Western Australian real estate market, West Perth sees several leasing deals from resources to science, aviation, and more. The area also saw two properties come to market, to be sold either in one line or separately.

Experts also pondered the opportunities that office refurbishments could bring to the market, particularly as ESG requirements become more of a sticking point, and new supply is constricted by a challenging market and soaring construction costs.

West Perth development site hits the market

Located at 678 Murray Street and 88 Havelock Street in West Perth, over 3,800 square metres is coming to market.

The properties are being brought to market by Sean Flynn, Director, Capital Markets, and Senior Director, Nigel Freshwater of JLL together with Brett Wilkins, Director, Capital Markets and Joint Managing Director, Stephen Harrison of Ray White Commercial via an expressions of interest campaign.

The agents noted the site is zoned “City Centre”, with redevelopment opportunities including high-rise office to residential apartments, build-to-rent, student accommodation and hotel/short stay accommodation, and the underlying density provisions could support the development of well over 12,000 square metres with bonuses (STCA), without the constraint of a prescribed maximum building height.

The properties also feature existing office and warehouse improvements totalling over 2,500 square metres, plus 48 car bays, with current leases delivering holding income.

The properties are offered for sale in one line or separately via Expressions of Interest, closing Wednesday 24th May 2023.

Four leases across West Perth

Pilbara Minerals and Scitech have leased 1,119 square metres and 790 square metres, respectively at 1 Campell Street. The latest leasing deals for the property were negotiated by Rick McKenzie and Greg McAlpine of Knight Frank on behalf of the property owner, Woss Group.

The commitments take the total area negotiated by Knight Frank within the Woss Group portfolio of office buildings in West Perth to over 7,000 square metres since 2022.

Other recent tenant commitments to the buildings in the portfolio include Lockton Group, PHI Aviation, and 29 Metals at 1100 Hay Street.

Newman tavern listed

The Red Sands Tavern and Accommodation Park is up for sale by local vendors, with the property located at 1982 Newman Drive. Sitting across two sites, the property totals 10,159 square metres. The 83-hotel room accommodation facility is on one 4,127 square metre site and the tavern is on the other 6,032 square metre site, complete with a drive-through bottle shop and alfresco areas.

CBRE’s Ryan McGinnity and Aaron Desange are managing the sale via an Expression of Interest campaign closing June 1 2023.

“Being one of only two taverns in town and one of three bottle shops, the Red Sands is a high cash flow business with huge upside,” McGinnity said.

“Looking back over the last four years, the tavern has performed very well with the security of multiple income streams. The 2023 forecast revenue is over $7 million with an EBITDA in excess of $2 million, budgeted to increase into 2024.”

Out with the new, in with the old?

With the challenges of construction still hampering the office market in Western Australia, could refurbishing older commercial buildings be the answer?

Cushman & Wakefield‘s joint heads of capital markets, WA, Nick Charlton and Ben Younger, both offered their insights into the benefits of refurbishment.

Charlton and Younger argued that commercial must pivot to refurbishing older commercial assets due to the increasing pressure on sustainability credentials for occupiers, reducing carbon footprint, and the state being the most expensive in the country for construction costs.

They recalled the tough context developers have to contend with:

“Developers within Western Australia must manage with a smaller pool of major tenants who occupy in excess of 3,000 square metres.”

Nick Charlton and Ben Younger, Cushman & Wakefield

The company’s database shows the total Perth CBD stock is 1,806,792 square metres of which we have 55 tenants leasing 3,000 square metres or more totalling 532,219 square metres. This tenant pool is representing about 30% of the market and this limited pool makes it harder to get the requisite pre-commitments in place prior to securing funding. Tenants above 20,000 square metres represent 13% of the CBD office market.

Building new offices has also become more expensive, Charlton and Younger added that there is a “knock-on effect”, with economic rents required to construct a new office tower rapidly escalating.

Should new supply continue to be hampered and vacancy rates decline, Charlton and Younger said there are opportunities in refurbishing older buildings.

“There are also environmental benefits to repurposing older buildings. By breathing new life into an existing structure, we are reducing the need for new construction materials and decreasing the carbon footprint associated with new builds. It’s arguably a more sustainable approach to development and can help us work towards a greener future.”

While there are limitations, the pair cited recent examples of refurbishment, including:

  • Carillon City,
  • Dynons Plaza,
  • 125 Hay Street,
  • State Buildings,
  • 186 & 190 St Georges Terrace, and
  • Parmelia House.

You May Also Like

Australia’s return to office continues to shine as the US stagnates at 50 per cent of pre-Covid levels

The Australian office market records improved office occupancy while the United States lags behind on the return to office.

Work from home is here to stay, and Australia’s secondary offices are at a turning point

Secondary office assets face challenges with poor uptake and declining values, especially in B and C-grade properties.

Why Australia needs more industrial assets to boost productivity and growth

A new report reveals that Australia’s industrial assets handle over $1.2 trillion worth of products annually.

Sydney’s retail sector continues to improve, with one area boasting zero vacancy

Vacancy rates for Sydney’s prime retail core have dropped to 8.3%, with the one area recording vacancy rates of zero.