Perth to lead nation for office rent growth: CBRE
Perth’s office sector is set to outperform the rest of Australia’s major CBD markets this year, according to leading commercial real estate services and investment firm CBRE.
CBRE expects the West Australian capital to record the highest “prime rental growth” nationally, amid a resurgence in the state’s resources sector and the growing popularity of co-working, which is having an impact across the board.
CBRE’s Australian head of research Bradley Speers says Perth’s office market is continuing to gain ground on its eastern cousins.
Commercial Insights: Subscribe to receive the latest news and updates
He says the supply pipeline over the next few years for Perth is relatively dormant; a “good thing” for those sitting in a market with a headline vacancy of 18%.
“With strong demand at the top end of the market, premium vacancy is sub-five per cent in Perth, similar to levels seen in Sydney and Melbourne. This is helping to bring incentives down from highs north of 50% to mid-40% – and driving effective prime rental growth.
“This is expected to continue in 2019, with the Perth CBD prime effective rental growth outperforming the rest of the country,” Speers says.
The rise and rise of co-working will start to have an impact in Perth too, according to CBRE’s senior director of advisory and transaction services for office leasing, Andrew Denny.
“There is already around 8000sqm of co-working space in the Perth market, with this expected to increase by an additional 11,000 square metres over the next six months.
“In the medium term, at least two per cent of the CBD market could be co-working if trends in other markets are followed in Perth,” Denny says.
Denny says while co-working has typically been regarded as space targeted to start-ups and entrepreneurs, the majority of demand is actually from the corporate sector.
CBRE estimates that the flexible workspace industry occupies about 193,000sqm of space across the six major capital cities, with 40% of occupiers currently using some form of flexible workspace solution.
“In Australia, co-working is a growth tenant; accounting for almost one-fifth of net absorption in the market last year. In Sydney and Melbourne, we’re seeing co-working operators move into non-CBD areas and in Brisbane, there has been the first example of an operator opening in a shopping centre.
“Expansion of co-working is a growing global trend we’re going to see moving forward,” Speers says.
Speers also notes that for the first time in several years, all major capital city CBD office markets should record rental growth this year, underpinning investment, both from domestic and offshore investors.
“The rental growth story panning out this year will underpin investment in Australia’s office markets, with Perth looking increasingly attractive amid the yield spread between east coast markets. More Australian investors are looking to Perth for investment,” Speers says.