New signs of life in Perth office leasing market

Firms are flocking back to Perth’s economically-weathered CBD with office vacancy rates falling for the first time in five years.

Several major companies have returned to the city’s centre from the suburbs in recent months, while companies from the eastern states are also setting up shop.

New research from CBRE highlights the “flight-to-centre” trend.

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The CBRE report predicts office vacancy in Perth’s CBD will drop from 22.5% in January to 21.5% by the end of this month.

It follows a period of soaring vacancy that began in January 2012 when the figure was at a low 3.3%.

CBRE senior director of office leasing Andrew Denny says the vacancy decline is occurring much faster than expected.

The majority of relocating tenants moved from West Perth, accounting for 32% of relocations, followed by Subiaco with 15% of relocations, Northbridge and East Perth

Suburban tenants, particularly those from West Perth, are driving the switch.

“These tenants, some of whom initially relocated to suburban markets when the CBD market became too expensive at the height of the mining boom, are taking advantage of the current market to re-establish their presence in the city,” Denny says.

“In addition to the take-up of space from suburban tenants moving into the CBD, there is positive growth from expanding tenants, as well as new entrants — including some from the eastern states.”

Firms to relocate from Perth’s suburbs include advisory firm Grant Thornton Australia, which moved to Central Park from West Perth.

Perth’s office leasing market is showing signs of life.

Legal firm Wrays shifted from the same suburb to the award-winning 216 St Georges Terrace complex. NG Services moved into the same west end building from Bentley.

The availability of CBD subleases in the WA capital has fallen for five consecutive quarters — by around 35%— since a peak in December 2015.

CBRE research manager Gemma Alexander says 34 tenants relocating from outer metropolitan markets have signed deals within Perth’s CBD since the start of 2017.

“This accounted for around 28% of total deals signed in the city during this period,” Alexander says.

In addition to the take-up of space from suburban tenants moving into the CBD, there is positive growth from expanding tenants, as well as new entrants

“The majority of relocating tenants moved from West Perth, accounting for 32% of relocations, followed by Subiaco with 15% of relocations, Northbridge and East Perth.

“These relocations have contributed to more than 20,000sqm of net absorption in the CBD.”

This was demonstrated through engineering company Clough Limited leasing a full floor at 18 Mount St.

Industrial services firm Cape secured 933sqm at 216 St Georges Terrace.

The report found Perth’s prime CBD market is forecast to recover from its downturn at a “far more” rapid rate than the secondary market, which is expected to deteriorate further before any improvement.