WA office market shows resilience amid pandemic pressure
Perth’s CBD office market has remained one of the most robust in Australia, despite COVID-19 transitioning businesses from traditional workplaces to work-from-home set-ups.
Industry analysts say while office markets across the country have suffered downturns as a result of pandemic-related lockdowns, Western Australia has fared better than most – largely due to the state’s strong mining sector.
Western Australia’s office market had improved ahead of other states because of its mining boom and significant increases in employment, according to Nerida Conisbee, chief economist at REA Group.
Ms Conisbee said while Perth’s office occupancy rate had dipped, it was still considerably higher than other Australian capital cities.
“Definitely, the improvement to employment as a result of the mining boom is good news for the office market [in WA],” she said. “But the bad news is the fact that we have big changes to the way people are working due to COVID, so that draws away from this employment increase.
“What is interesting is that although we are seeing these big challenges with tenant demand, investor demand is really strong for offices nationally.”
The latest Property Council of Australia data showed office occupancy in Perth was at 66% in January this year, down from 77% in December 2020, compared to 82% pre-COVID.
Perth recorded the only decline in office occupancy between December and January, attributed largely to the snap five-day lockdown in late January and early February.
A report by JLL released last week found the impacts of the pandemic on office markets differed considerably from city to city, but the effect had been less pronounced in Perth and Adelaide than Sydney, Melbourne and Brisbane.
“WA has fared remarkably well compared to the rest of the nation and on a global level,” Ronak Bhimjiani, JLL WA Manager – Strategic Research, stated in the report. “As such, we expect the economic recovery in WA to outpace that of other states and nations around the world.
“Perth’s CBD office market has proven to remain resilient, despite the downturn. However, demand for office space has been impacted, much like it has around the country and the rest of the globe, and it is arguable that a ‘new normal’ can be expected for the office market.”
The report stated, with the resources sector relatively unaffected by COVID-19, base demand for office space in the Perth CBD had remained consistent. The mining and professional services sectors represent 56.7% of Perth CBD’s overall office tenant footprint.
An artist’s impression of Rhodes House, which is currently being constructed. Picture: DFD Rhodes Pty Ltd
But Sallese Wilmot-Barr, from Ray White Commercial WA said while the WA economy was showing strong signs, ongoing demand for office space was expected to remain limited.
“Over the past six months, the Perth CBD has lost 32,991sqm of occupied stock, resulting in vacancies growing to 20%,” Ms Wilmot-Barr said.
“This negative take-up is a symptom of space consolidation in the A-grade market, with tenants such as Worley Parsons and St George reducing their accommodation requirements as well as business relocation, such as WA Police into East Perth.”
She said while there had been a strong movement of the workforce back into the CBD in late 2020 and early 2021, the snap five-day lockdown in late January and early February had led businesses to continue off-site working options for employees.
COVID-19 had put further pressure on the office market, driving vacancies up, and the new supply pipeline would further hamper a timely recovery, she said.
Other recent movements in the office sector include cyber safety specialist Family Zone taking on a new CBD tenancy at 45 St Georges Terrace and the construction of boutique office space, Rhodes House, in West Perth by investment and agricultural company DFD Rhodes Pty Ltd.
