2024-06-07-莱坊-Perth_CBD_Office_Market_April_2024_9页_1mb

Perth CBD Office Market Summary (April 2024)

Core Content

Perth's CBD office market has continued to outperform Sydney and Melbourne, showing strong rental growth and declining vacancy rates. Despite a negative net absorption for the year to January 2024, the overall market has remained resilient due to sustained demand and strategic stock withdrawals.

Key Market Indicators

Main Points

1. Vacancy Decline

• Total vacancy in Perth CBD fell to 14.9% in January 2024 from 15.7% in January 2023.
• Sub-lease vacancy remains 0.5%, one of the lowest nationally and significantly lower than Sydney and Melbourne.
• Prime vacancy is 7.8%, while secondary vacancy is 18.5%, reflecting the market's bifurcation in demand.

2. Net Absorption

• Total net absorption was -55,081 sqm for the year to January 2024, mainly due to a PCA boundary re-cut.
• Prime net absorption was positive at 17,601 sqm, driven by strong demand for high-quality assets.
• Secondary net absorption was negative at -72,682 sqm, largely due to the withdrawal of B and C-grade assets.

3. Rental Growth

• Prime net face rents grew by 6.8% over the year, with an average of $713/sqm.
• Effective rents grew by 12.0% y/y, supported by reduced incentives and strong demand.
• Prime rental growth is expected to continue, with a forecast of 3.8% increase in net face rents over the next five years.

4. Supply Pipeline

• A significant amount of new supply is expected between 2024-2027, including:
  • 1 Spring Street (13,681 sqm) – H1 2024
  • 9 The Esplanade (32,000 sqm) – H1 2025
  • Lot 4 Elizabeth Quay (69,000 sqm) – H1 2027
• Additional projects like 250 St Georges Terrace (QV1) and 186 St Georges Terrace are being refurbished, adding over 25,000 sqm of quality space.
• The supply pipeline is expected to cause a slight increase in vacancy in the medium term, though it is anticipated to remain stable due to limited new supply in 2027-2028.

5. West Perth Market

• West Perth has a vacancy rate of 12.1%, up 1.0% in H2 2023, due to new supply completions.
• A-grade vacancy in West Perth is 5.0%, while B-grade vacancy is 15.6%.
• The market is increasingly viewed as a viable non-CBD option, offering convenience, efficiency, and affordability.

6. Market Sentiment and Outlook

• Market sentiment is improving as inflation figures decline and global interest rates fall, suggesting potential for rate cuts in 2024-2025.
• Transaction volumes remain low, but there is a clear upward trend in pricing and capital values.
• The yield spread between prime and secondary markets has narrowed from 135 bps to 123 bps.

7. Incentives and Leasing

• Incentives in the prime market have dropped to 46.3%, contributing to strong rental growth.
• Secondary incentives also decreased to 51.0%, reflecting improved performance and CAPEX investment.
• The decline in incentives is seen as a positive trend, mirroring pre-pandemic patterns and indicating further tightening in the coming year.

Conclusion

Perth's CBD office market remains robust, outperforming other major cities in terms of rental growth and vacancy reduction. While the overall net absorption was negative, the prime market continued to thrive, driven by strong demand and limited supply. The West Perth market also shows resilience, offering a complementary space to the CBD. With the supply pipeline and improved sentiment, the market is expected to remain stable and potentially see further growth in the coming years.