2026-02-01-莱坊-High_economic_rents_drive_Perth_supply_drought_Q1_2026_9页_1mb

Summary of Document: High Economic Rents Drive Perth Supply Drought

Core Content

The document discusses the current and future state of the Perth CBD office market, highlighting the significant disparity between economic rents and forecast rents, which is constraining new development feasibility. It outlines the key drivers behind this trend and the implications for the supply pipeline and market dynamics over the coming years.

Main Points

• Economic Rents are High:

  • Economic rents for a new premium office tower in Perth CBD are estimated at $1,280/sqm (net face rent) as of Q4 2025.
  • This is 100% higher than in Q1 2021, indicating a sharp increase.
  • Current forecast rents are $880/sqm (net face rent) by Q4 2028, assuming 3% annual growth.

• Gap Between Economic and Forecast Rents:

  • The gap between economic and forecast rents is 46% as of Q4 2025.
  • This gap is expected to narrow by around 2030, when yields may compress and rents could rise closer to economic levels.

• Development Feasibility Constraints:

  • The development pipeline has thinned significantly due to the high economic rents and low forecast rents.
  • No new premium office supply is expected to be completed beyond 2025, with the supply additions over the next 3 years at 0.8%, likely to fall to 0%.

• Drivers of High Economic Rents:

  • Construction Costs: Increased by 64% from Q1 2021 to Q4 2025, driven by material and labor cost rises.
  • Interest Rates and Yields:
    • Interest rates have risen sharply, increasing borrowing costs.
    • Yields have also increased, reducing capital values and making development less attractive.
  • Incentives: Higher incentives are reducing the net effective rent and further widening the gap between economic and forecast rents.

Key Information

• Current Economic Rent: $1,280/sqm (net face rent).
• Current Forecast Rent: $880/sqm (net face rent) by Q4 2028.
• Construction Cost Increase: 64% over 4 years.
• Yield Increase: From 6.5% in 2021 to 7.6% in 2025.
• Vacancy Rates: Currently at 10.8% in Perth CBD, expected to tighten as tenants seek space.
• Supply Outlook:
  • No new premium office developments under construction beyond 2025.
  • New developments may not be feasible until around 2030, with the gap closing to 7% by then.
• Rent Growth Forecast:
  • Premium office rents are projected to grow at 9.1% p.a. from Q4 2025 to Q4 2030.
  • This growth is expected to outpace the 10-year average and may be further accelerated by supply constraints.

Market Implications

• Supply-Demand Imbalance:

  • Limited new supply will drive stronger rent growth and improved occupancy for existing premium and A-grade assets.
  • Tenants may reduce leased area or increase working from home to offset rising rents.
  • Demand for shared spaces is expected to rise as a cost-saving measure.

• Developer Strategy:

  • Developers may focus on CBD locations with higher rents and tighter yields.
  • Refurbishments of existing buildings could become a more viable alternative to new developments, especially for high-end tenants.

• Investor Behavior:

  • Traditional development-focused investors may shift to stabilised assets and core-plus investments due to the high development costs and low feasibility.
  • A tighter leasing market could lead to a rebound in capital markets, with improved liquidity and investor confidence.

Outlook

• Economic Rents Likely to Peak:

  • Economic rents are expected to remain stable at $1,280/sqm until 2030.
  • They are projected to stay above forecast rents until 2030, with the gap closing to 7% by then.

• Feasibility of New Developments:

  • New developments may not be feasible until around 2030, when yields are expected to compress and rents to rise.
  • Projects like 15 The Esplanade may be the first to proceed if the gap narrows sufficiently.

Methodology and Assumptions

• Model Used: A 10-year discounted cash flow (DCF) model to estimate economic rents.
• Assumptions:
  • Construction cost growth at 4% p.a.
  • Rent growth at 3% p.a. during construction.
  • Yields to compress by 58 bps by Q4 2029.
  • Development cost funded by 60% debt.
  • Target IRR of 10% for developers.

Conclusion

The high economic rents in Perth CBD, driven by increased construction costs, interest rates, and yields, are creating a supply drought in the office market. This is expected to continue until around 2030, when the gap between economic and forecast rents may narrow enough to allow new developments. The market is poised for strong rent growth and tighter supply, which could lead to a recovery in capital markets and a shift in investor focus towards stabilised assets.