Growing waves of office construction as Perth commercial property comes of age
Perth is now a key player in global commercial office markets. A growing list of multi-national companies are locating in Perth resulting in a wave of new office construction in the CBD and key suburban centres. This is creating exciting development opportunities and challenges asolder buildings compete with new offices for tenants.
The Property Council of Australia’s latest Office Market Report illustrates the scale of new office development happening in Perth and the emerging challenges. In the six months to January 2014, the Perth CBD office vacancy rate rose from 6.9 to 9.0%. This rise is linked to the slowing down of the mining investment boom and the corresponding decline in demand for office space by mining companies and businesses providing mining services.
However, while the overall vacancy rate may have risen, the demand for premium grade offices in the CBD has actually strengthened, which is evidence that the commercial office market is sorting itself as businesses move into new office towers and the space they left behind is filled. It is worth noting that all new major office developments in Perth today are pre-leased before construction, which ensures that the speculative building booms of previous decades that lead to blow-outs in vacancy rates is not repeated.
Another factor that will support the Perth office market is the continuing presence of multi-national companies like resource giants BHP Billiton, BP, Rio Tinto, Woodside, Chevron and Shell. And while growth in investment in the iron-ore sector is slowing it is expected that investments in LNG projects will continue to generate positive demand for office space.
It is not just resources-based companies that call Perth home. Local-grown success Wesfarmers has their corporate headquarters stationed in Perth, despite taking over thenational Coles Group conglomerate. The Big Six law firms, as well as the major accounting firms all have large offices in Perth.
Perth has seen an influx of significant investments from major property and construction companies attracted by world-class development projects in and around the CBD, such as the City Link, Elizabeth Quay and Waterfront. The suburbs of Perth are also seeing a raft of new office developments, from Belmont to Subiaco and Herdsman through to Fremantle.
This will provide construction work and inspiration for inner city entertainment and culture, but more new office supplies will inevitably put pressure on older buildings as occupancy rates vary with economic cycles. This in itself may lead to more building upgrades and refurbishments, or even changes of use like hotel conversion and apartments
This all adds up to an exciting time for the commercial office sector. The size and diversity of Perth’s corporate sector places the office market in the position where it can cope with the challenges and benefit from the opportunities that arise better than ever before.
Joe Lenzo is executive director of Property Council of Australia, WA division.
