Ray White Commercial WA has released its Between The Lines : Perth Office Market Overview Report for March 2022.

According to the report, the Perth office markets have been one of the best performers across Australian office markets, with Perth CBD recording the highest annual net absorption for 2021 calendar year at 67,550sqm. 

This huge take up has been experienced across the city and size ranges with demand coming from a mix of professional services as Perth’s rigid border controls allowed the office markets to continue working at full force. 

Perth Economy continues to strengthen with lowest unemployment in a decade

While other markets grapple with getting their staff back into physical office space, the Perth market and its economy continue to grow, resulting in unemployment of just 4.2%. This is the lowest rate on record for over ten years. West Perth has also seen a push by smaller businesses with positive take up also recorded, again one of the top 3 nationally for demand behind the much larger Brisbane Fringe and popular coastal Sunshine Coast market. 

While vacancy had recorded a prolonged high, it will take some time for this demand to filter through across the rental market. Continued choice available for tenants and competition amongst regions has ensured that rents remain static and incentives continue to be a feature in the short to medium term. 

Luke Pavlos - Director of Commercial Services said “There’s been a strong level of enquiry over the past 12 months off the back of positive market sentiment and strong commodity prices. Tenants are planning for life after Covid 19 with a need for a new adaptive workplace environment which allows more flexibility to its workforce and encourages them to be in the office. Take-up continues to be driven by tenant’s flight to quality and entrants from suburban markets to the CBD taking advantage of better-quality buildings and amenity for their staff. Mr Pavlos said proactive landlords (those who have investing in upgrading their buildings) have been the beneficiaries of this recent take-up.

Sub-lease Stock is basically 0% which is extremely positive for Perth, and we are now seeing tenants planning for future growth.

Investment yields are satisfying appetite of local investors, funds, REITS, and other investment vehicles

However, these indicators have not gone unnoticed by investor groups, who are now converging on the Perth market looking to capitalize on attractive yields compared to other East Coast options. Buyers across all size ranges have a renewed confidence in the Perth market, with smaller options attractive to local and interstate private groups while the larger end of town continues to be actively pursued by both domestic and international funds, REITs and other investment vehicles. Some of the more prominent sales over the last 12 months include 140 St Georges Terrace which sold to a JV of Primewest Group and BlackRock Real Estate at a reported $272 million and Capital Square Tower 1 with a 49% interest to Dexus on a reported $390 million deal.

The future is looking brighter for the Perth office market; however, the depth of potential supply will be a stumbling block if it continues speculatively. The need for a considered addition of stock into the marketplace will ensure the trend of vacancy improvement continues, which will benefit landlords with rents and capital values.

Find the report here: Between The Lines : Perth Office Market Overview Report March 2022.