- Perth CBD office market currently the top performer across all capital cities.
- Demand driven by WA's resilient resource sector and post-pandemic return to work.
- Rent growth expected to sustain for at least 12 more months.
Fresh data from the Property Council of Australia has revealed that Perth’s office market is booming, with the capital city being flooded with a wave of demand for prime refurbishments and state-of-the-art modern office spaces.
A nation-leading surge sweeping Perth CBD
Even though 67,479 square metres of office space entered the market in the past six months, the Property Council of Australia’s July Office Market Report revealed that Perth’s office vacancy has been standing at an essentially unchanged 15.9%, with a minor 0.2% uptick since January 2023.
Property Council WA executive director, Sandra Brewer, argues that the key figures in the office report obscure the leap in demand for office properties in Perth’s Central Business District (CBD).
Perth CBD six monthly net demand – July 1990 to July 2023
“Demand has soared beyond the historical average by more than double, showcasing the strength of Perth’s strong post-COVID-19 return to work and the enduring significance of the CBD as a premier destination for businesses,” Brewer says.
West Perth’s office vacancy rates have dropped by 2.1 percentage points from the six months to July 2023, with its vacancy rate now standing at 11.1% — now the 5th decrease in a row.
Landlords the winners in the race for Perth CBD office space
Cushman and Wakefield director head of leasing WA, Roly Egerton-Warburton, is confident about the state of Perth’s CBD, particularly on improving commercial terms in the capital city. He remarks that net rents are rising and that the limited fitted space is lowering incentives.
“Perth is leading the charge on occupancy nationwide, which mirrors the performance of our economy. WA is now the world’s largest producer of lithium, gold, and iron ore, and the direct link from the resources sector to CBD tenant demand is very clear,” Egerton-Warburton says.
“West Perth is a great barometer of this showing a further drop in vacancy. Cushman & Wakefield are very bullish about the coming 12 months.”
The report also finds an ongoing dip in sublease vacancy rates, preserving Perth’s rate much lower than the historical average.
CBD sublease vacancy – six months to July 2023
“A low subleasing rate is a positive indicator of market stability and confidence, suggesting businesses occupying office spaces are confident in their growth and are optimising spaces effectively,” Brewer comments.
“Flexible workspaces has also emerged as a popular solution for businesses, as we witness a growing trend of offices seamlessly integrating these flexible offerings within their premises.
“High-quality innovative office spaces continue to invigorate the Perth office market, providing businesses with modern and adaptable workspace options to cater to their evolving needs.
“This ongoing transformation promises a vibrant future for Perth’s office landscape.”
Industry leaders bet big on Perth CBD
CBRE senior director of office leasing, Andrew Denny, is also optimistic about Perth’s office market, remarking that it has consistently shown healthy growth despite other office markets struggling globally.
“Strong tenant demand, underpinned by Perth’s buoyant mining sector, is ongoing and expected to continue.”
Andrew Denny, CBRE Senior Director of Office Leasing
“The CBD had substantial new supply enter the market in the last six months, yet there is still strong rent growth at the top end of the market. This is a trend that will continue for at least the next 12 months. CBRE Research numbers show Perth CBD Premium grade effective rents grew by 11.1% in 2022, the highest increase since 2011, with forecasts of a further 7.8% in 2023. Rent growth in lower-grade buildings will be significantly lower.
“The West Perth and suburban office market share are experiencing even stronger conditions, with only one new office building under construction.
“The negative effect of the work-from-home trend is minimal in the Perth market and is heavily outpaced by the dominant theme of expanding tenants.
“Moving forward, with sharply reduced vacancy rates in the suburban markets, we expect a growing number of tenants, especially larger space users, to relocate to the CBD from the suburbs.”