How would you characterise your market at the moment?
The Perth CBD and West Perth office markets are the most tightly held in Australia by a long way. There is an acute shortage of space in these areas. Companies associated with the resource sector will continue to dominate demand in 2012 and with record levels of resource expenditure planned in WA, the demand for office space from these companies is unlikely to slow in the short to medium term.
Are there any trends you are noticing among the tenants you are talking to?
Larger tenants have very limited choices and all planned new development is subject to minimum 50% pre-commitment. Perth has not had a significant pre-commitment history so tenants will now be forced to plan further ahead and wait minimum 2.5 years for major CBD stock.
What do you think will be the biggest influence on your market in Q2?
Existing and future supply is the key issue in the Perth market. There will be no major CBD completions, with available space, until late-2014/2015.
Demand for CBD office space is forecast to circa 85,000 sqm, which is well above long term average of 22,500 sqm.
What will rents and incentives do in Q2?
The high level of demand and lack of vacant space will see rent continue to increase. With rent rising quickly, owners are hesitating to release an asking rent to the market.
What should landlords do to adapt to these market conditions?
Landlords should and are, increasing their minimum lease term expectations. The Perth market is in a strong position with a very positive outlook for commercial landlords and developers.
Nick Van Helden
Director, Office Leasing, Western Australia
Recent Leasing Deals
Market Balance, as at March 2012
Download a PDF of the Perth Q112 Market Overview