Confidence Improving in Perth Office Market as Major Transactions Pick Up

Perth's flagging commercial office market appears to be showing signs of revival, according to a new report released by real estate firm, Savills Australia.

Rising business confidence levels, buoyed by rallying commodity prices have prompted in transaction activity in Perth's prime office leasing market.

“One of the most telling signs of recovery is the decline in the availability of prime full floors to lease,” Savills' associate director for research Katy Dean said.

The Savills full floor availability report – which tracks premium and A-grade buildings on a floor-by-floor basis across existing markets – claims that the number of full floors available has decreased from 169 to 148 in the 12 months to March 2018.

With the total number of available floors peaking in August 2016 at 180, Dean says the market for prime office in Perth is well and truly on the upswing.

“The vacancy differential between prime- and secondary-grade stock is now at its highest, and a potential increase in prime supply created by new developments cannot easily counter-balance the demand in the short-term,” she said.

“The last time the market saw this level of prime full-floor availability was back in 2013,” Ms Dean said.

According to Savills director for office leasing Shelley Ritter, a combination of a “flight to quality” from occupiers and historically low new supply within and outside of the CBD were driving the resurgence.

“There are currently only two premium assets that can provide contiguous floor options for a 5,000 square metre tenant, and only four premium buildings that can provide options for a 1,000 square metre tenant,” she reported.

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Transactions in Perth's office market has picked up of late, with news that local syndicator Primewest is looking to cash in on the recovery by offloading their 50 per cent stake in Perth's Exchange tower for a reported total value of $340 million.

Primewest acquired its half stake in the 40-level tower for $230 million in 2016 and has invested in a $50 million upgrade of the building.

The balance of the tower is owned by an AMP Capital Wholesale Office Fund.

Other recent deals include OKP Holdings February acquisition of 6-8 Bennett Street for $43.5 million and Zone Q's purchase of two St Georges Terrace buildings for $120 million.

OKP Holdings 8 Bennett Street acquisition was the Singapore-based company's first foray into Australia.