Perth office vacancy rate highest in over 20 years
The Perth CBD office market vacancy rate has reached the highest level in over 20 years. This is following new office completions and weakening demand for new space by CBD tenants, according to an industry leading market report.
The Property Council’s latest Office Market Report found the Perth CBD office vacancy rate rose from 19.6 per cent to 21.8 per cent during the six months to July 2016. Nationally, the average vacancy rate fell within the same time period from 10.5 per cent to 10.4 per cent.
In the six months leading to July 2016, Perth experienced 30,582sqm of new office supply additions. Weaker demand for new offices by tenants in Perth led to 17,241sqm of negative net absorption of office space.
The report also found that Perth’s long cycle of new office supply has come to an end with only 589sqm coming online in the next six months, and no additional stock expected until late 2018.
“These results are significant because a major factor that has driven the high vacancy rate in Perth has now come to an end with very little office supply expected over the next two years. From now on it will be demand for office space that will drive the market in Perth,” Property Council WA Executive Director Lino Iacomella said.
“In West Perth, office vacancy also rose from 12.2 per cent to 14.8 per cent in the first half of 2016, however the absence of new office supply in West Perth has moderated the increase. There was 11,061sqm of negative net absorption of office space recorded in West Perth. West Perth is not expecting new supply of office space over the short to medium term.
Due to a lack of supply additions, the Perth CBD is expected to stabilise with tenants adopting a flight to quality approach over the medium term. The B grade segment experienced the largest increase in vacancy from 23.7 per cent to 28.5 per cent in the six months to July 2016.
“The Perth office market is continuing to adjust to new economic conditions in WA and the key to the market’s future in the next few years will be the ability to diversify the tenant pool in the CBD, including industries like education and health services.
“Older commercial buildings in the CBD will also come under consideration for residential conversion or even redevelopment to mixed-use precincts”, said Mr Iacomella.
For more information or to purchase the July 2016 Office Market Report, click here.
Media contact: Lino Iacomella | E [email protected]