Perth CBD office demand grows for eighth consecutive quarter

Net absorption hit 22,300sqm in Q3. 

According to a JLL report, headline vacancy in the Perth CBD decreased by 1.2 percentage points (ppts) to 17.3% in the third quarter, with quarterly net absorption totalling 22,300 sqm over the quarter; marking the eighth consecutive quarter of positive net demand.

“Expansionary activity as well as new business entrants into the Perth market were significant contributors to net absorption over the quarter. Occupier activity was predominantly led by tenants within the government and professional services sectors,” the report said.

Here’s more from JLL:

No significant office developments completed in the Perth CBD over the quarter. Nevertheless, the existing supply pipeline is elevated with five projects under construction totalling 136,900 sqm.

Other than developments currently under construction, the supply pipeline for both the Perth CBD and West Perth office market remains limited given elevated vacancy rates. Plans are approved for a further nine projects in the CBD, totalling 171,100 sqm. Proposed new office projects are likely to require substantial pre-commitment to proceed.

Perth CBD office rents increase

Perth CBD prime net effective rents increased to AUD 281 per sqm per annum (2.4% q-o-q), with y-o-y growth of 3.6%. Prime net face rents increased (1.8% q-o-q) to AUD 649 per sqm per annum, reflecting y-o-y growth of 3.1%.

Stabilising cost of debt pressures saw Perth CBD prime office yields hold steady in the quarter to a mid-point of 7.13%.

Outlook: Robust WA economy to support demand for office space

WA’s economic growth has continued to outperform the national average, driven by ongoing strength within the resources sector. With a strong pipeline of resources projects approved, demand for office space is likely to be led by the mining and professional services sector.

Economic instability from factors such as inflationary pressures and rising borrowing costs are expected to continue to reduce the attractiveness of office assets to buyers relying on leveraged capital sources. Investors are likely to be selective in terms of potential acquisitions, as both buyers and vendors continue to undergo a price discovery phase amongst shifting economic conditions.

Note: Perth Office refers to Perth's CBD office market (all grades).