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      Commercial Real Estate & Offices for Rent – Perth CBD

      Trends in commercial real estate and the office market in Perth CBD

      The Perth CBD is occupies a picturesque location nestled between the Swan River to the south and south east and Kings Park to the west. The precinct extends to Newcastle Street to the east.

      With its stunning natural surroundings and cosmopolitan cultural scene Perth offers a fantastic lifestyle. From a business perspective its proximity to Asia makes Perth a savvy choice. Indeed Perth is closer to Singapore and Jakarta than it is to Sydney and it shares the same time zone as 60% of the world’s population. Renting office space in the Perth CBD places your business alongside some of Australia’s most influential corporate heavy weights including BHP Bilington, RIO Tinto, Woodside, Shell Australia, Chevron Australia and WesFarmers.

      Perth’s commercial real estate market is undergoing a period of adjustment following the end of the decade long mining and construction boom. The WA economy has been seriously impacted with unemployment rising to around 6.0% up from near full employment (3.5%) in 2012. Whereas WA was not long ago Australia’s fastest growing state, its population is currently in decline.[1]

      The sharp contraction in mining investment has seen both resources and related services companies downsize. The government sector too has been afflicted with a reduced flow of mining royalties. As a result the Perth CBD office market has experienced six consecutive quarters of negative absorption since 2012.[2]

      Vacancy levels are at their highest point in 20 years. Overall vacancies are close to 17% as compared with 3.8% at the peak of the boom.[3] The vacancy rate for secondary stock is even higher at 20.7%.[4] The situation has been exacerbated by a glut of new supply coming on line over the past twelve months. Office stock increased by 2% in the year to July 2015.[5]

      Even more new stock is set to open up in the second half of the year with Kings Square, Brookfield Place and the Old Treasury redevelopment scheduled for completion.[6] Analysts do not expect tenant demand to take up the slack and Knight Frank forecast the vacancy rate to hit 22% by mid-2016[7]
      The weak conditions have put downward pressure on rental rates which have pulled back considerably after reaching a high point in 2012. As at July 2015 Average Net Face Rents were;

      Prime Stock:                          $560 to $664 per square meter per annum


      Secondary Stock:                  $406 to $442 per square meter per annum[8]


      The general consensus is that rents will deteriorate further, particularly in the secondary building categories.[9]At the same time incentives are up to around 45% (compared with 35% at January 2015) and should remain high into 2016.[10] There is even anecdotal evidence of incentives reaching 50% in some cases.[11]

      The new dynamic has motivated tenants to relocate to better quality premises. M3 Property have noticed a number of firms moving into the CBD from the West Perth and the fringe areas. M3 also point to increased demand for smaller tenancies with enquiries for sub 500 sqm on the rise. In response land lords are being forced to sub divide floors – something they were reluctant to do in the past.[12] .

      For switched on businesses the current correction in the Perth commercial real estate market represents a great opportunity. The balance of power has swung firmly in favour of the tenant. Land lords are now compelled to offer more flexible leases as well as generous incentives in the form of new fits outs.[13] 

      [2] Knight Frank – Perth CBD Office Market Brief October 2015, P2
      [3] Korda Mentha Real Estate – Perth CBD Office Market, Considerations for Stakeholders in Today’s Office Market, P3
      [4] M3 Property – Comm3ntary, Spring 2015 – Perth CBD Office Market
      [5] M3 Property – Comm3ntary, Spring 2015 – Perth CBD Office Market, P3  
      [6] Knight Frank – Perth CBD Office Market Brief October 2015, P1
      [7] Knight Frank – Perth CBD Office Market Brief October 2015, P2  
      [8] [8] Knight Frank – Perth CBD Office Market Brief October 2015, P1  
      [9] M3 Property – Comm3ntary, Spring 2015 – Perth CBD Office Market, P6
      [10] Knight Frank – Perth CBD Office Market Brief October 2015, P2  
      [11] Korda Mentha Real Estate – Perth CBD Office Market, Considerations for Stakeholders in Today’s Office Market, P5
      [12] M3 Property – Comm3ntary, Spring 2015 – Perth CBD Office Market, P4  
      [13] Korda Mentha Real Estate – Perth CBD Office Market, Considerations for Stakeholders in Today’s Office Market, P5  
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