Perth CBD office vacancy soars

The vacancy rate in Perth’s office market has reached its highest point in almost 20 years with new figures from the Property Council showing a vacancy rate of 14.8 per cent influencing CBD deals.

In its half-yearly Office Market Report, the Property Council said the overall 11.8 per cent CBD vacancy rate in July had climbed to 14.8 per cent in January.

Demand peaked in 2012 when Perth and West Perth had the tightest markets in Australia but in the void left by the mining downturn, companies have been relinquishing office space.

“These results are in line with what the industry was expecting and preparing for, ” Property Council of Australia executive director Joe Lenzo said.

“The office market in Perth is the barometer for the State’s economy. The lack of demand is a reflection of WA’s economic performance.”

Falling demand also hit the CBD’s resilient premium-grade buildings, where the vacancy is 8.5 per cent, almost double the rate in July.

Compounding future vacancy, the CBD will get a new batch of buildings this year when 149,601sqm of office space will be added to the market.

“It is likely that there will be greater moves for office building refurbishment and the government has a role in incentivising these changes, ” Mr Lenzo said.

While the high vacancy rate and demand for incentives are challenging building owners, agents say leasing conditions are ideal for relocating tenants.

The Property Council’s figures show more office space being vacated than leased with negative net absorption of 30,582sqm in the six months to January and 67,270sqm in the past year.

With more sought-after tenant features, higher-grade buildings are weathering the market better than their lower-grade counterparts. The vacancy rate is 15.2 per cent in A-grade towers and 17.4 per cent in B-grade towers.

West Perth’s office vacancy climbed to 10.9 per cent in January up from 9.2 per cent six months ago. “West Perth is feeling the pinch, reaching its highest vacancy rate since July 1999, ” Mr Lenzo said.