Perth CBD Today
It would have been great to be in Perth last week for the Corenet Global State of the CRE Markets panel, but this time it had to be virtual. Luckily, it did not change the content, and the insights by Alyson Martinovich, State Head of Tenant representation for Knight Frank in WA and Eza Ranjbar, Research Manager at CBRE Perth did not disappoint.
The economic overview reflected how the state is blessed with resources like no other state. Rents have improved, incentives have decreased, fitout costs are high, and there is good levels of activity in the CBD during the day as has been the case even during COVID.
The current status for the Perth CBD office market is:
– Vacancy is 15.1%, a decrease from 15.5% in mid-2024
– Supply: almost 40,000 m2 of stock is to be delivered in 2025
– Absorption for the second half of 2024 was healthy and positive 25,186 m2
– Absorption: 6 month net absorption average in the 5 years to January 2020 was positive 9,540 m2
– Absorption: 6 month net absorption average in the 5 years since January 2020 has been negative 236 m2 – note the figures are slightly distorted due to East Perth being extracted from the statistics in early 2024.
Our main takeaways from the panel and other market based discussions;
- Supply and economic rent seem to be an issue but only in the premium end of the market – it is a fork in the road in Brisbane and a stalemate in Perth
- Uncertainty is creating a challenging market and subsequent decision making is resulting in many lease renewals
- There is more discussion around utilisation rates, possibly meaning less space for tenants in the future?
- Industrial is still tight at around 1.5% vacancy compared to higher rates along the eastern seaboard
- East Perth, extracted from the PCA statistics for good reason, now has a vacancy rate around 30% and still presents one of the best opportunities in Australia to convert / repurpose to other uses – in time
A long term Perth trend continues – add lots of supply, high absorption, reduce vacancy and then start again. It would not surprise us if the market is in the same position in about 5 years as it is today.
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