Perth of­fice to ‘flip’ in 2018

The West Australian - - PROPERTY - He­len Shield

Next year will be the flip year for Perth’s lan­guish­ing CBD of­fice mar­ket, Knight Frank pre­dicts.

Knight Frank’s Ian Ed­wards, asked about whether the 110,000sqm-plus hunt for Perth A-grade of­fice would cure Perth’s 21.1 per cent of­fice hang­over or just shift the pain, said the mar­ket was chang­ing.

Land­lords in pre­mium and A-grade build­ings were on the cusp of re­mov­ing the rental in­cen­tives that had cre­ated a tidal wave of ten­ants mov­ing from the sub­urbs and fringe into the CBD, he said.

“2018 is go­ing to be the flip year, when we are sud­denly in a good mood about of­fice again,” Mr Ed­wards said. “Rents may stay the same but in­cen­tives will def­i­nitely fade away. I think we are not too far away from build­ing new build­ings. We will be plan­ning for them in 2019.”

Big names hunt­ing for of­fice up­grades in­clude Fortes­cue Met­als Group, grain han­dler CBH and Clay­ton Utz. Two un­named WA gov­ern­ment de­part­ments and the Com­mon­wealth Depart­ment of Hu­man Ser­vices are seek­ing 10,000sqm each. How­ever there is still a ques­tion mark over whether the space sought can be matched with the city’s big­gest va­can­cies, which are the A-grade Kings Square 1 on Welling­ton Street and soon-to-be va­cant 240 St Ge­orges Ter­race, which Wood­side will leave next year.

Most of the space is be­ing sought for 2020 or be­yond and more than half of it has been re­quested in the rapidly dwin­dling pre­mium grades.

Oil and gas giant Chevron, with a brief for 40,000sqm to 50,000sqm, ac­counts for about half the space, fol­lowed by Fortes­cue, which is seek­ing a 12,000sqm head of­fice with 2000sqm-plus floor plates and sig­nage.

At third place are the two un­named WA gov­ern­ment de­part­ments, seek­ing 10,000sqm each and the Com­mon­wealth Depart­ment of Hu­man Ser­vices (10,000sqm).

West Perth-based CBH is seek­ing 6000sqm and top-tier le­gal firm and QV1 res­i­dent Clay­ton Utz has put out an early call for 4000sqm.

Po­lice and Nurses Bank, now in Stir­ling Street, is said to be seek­ing an es­ti­mated 3000sqm, the same amount as the Aus­tralian Fed­eral Po­lice and Iluka Re­sources.

Aside from Chevron, which is said to be con­sid­er­ing all op­tions, as well as re­main­ing com­mit­ted to its Elizabeth Quay head of­fice de­vel­op­ment, Fortes­cue’s 12,000sqm head of­fice search has the po­ten­tial to un­der­pin a new build­ing.

Fortes­cue has re­quested 2000sqm-plus floor plates and sig­nage and de­clared it­self open to ex­ist­ing build­ings with con­tigu­ous floors or a newly built tower.

It has also spec­i­fied its need for 24-hour ac­cess, seven-days a week, best-in-class amenity with end-oftrip fa­cil­i­ties and se­cure stor­age for up to 120 bi­cy­cles as well as ac­cess to child­care fa­cil­i­ties.

Col­liers International’s Daniel Tay­lor said some of those mov­ing in from the fringes and the sub­urbs were shed­ding space, us­ing tech­nol­ogy to work smarter.

“Those ten­ants up­grad­ing will trans­fer (the pres­sure) on to the lower-grade build­ings,” Mr Tay­lor said.

JLL’s Nick Van Helden said some ten­ants with time to run on their leases were ty­ing to lock in agree­ments now while the mar­ket was skewed in favour of ten­ants.

“There are some big deals loom­ing,” he said.

CBRE’s Andrew Denny said some of the moves would in­crease sup­ply, adding that greater ac­tiv­ity lev­els were a bonus. “Where you have ten­ants ex­pand­ing or re­lo­cat­ing from lower qual­ity to higher qual­ity build­ings, that’s a plus for the CBD,” Mr Denny said. “In a num­ber of cases, that’s hap­pen­ing.”

Knight Frank’s Ian Ed­wards said of the 350,000sqm va­cant CBD space, about a third was qual­ity space and a third was old or obsolete.

“Right now, there’s only one build­ing with 10,000sqm of space, Kings Square 1. Next year, there will be 240 St Ge­orges Ter­race and in 2020 about 20,000sqm in Wes­tralia Square,” Mr Ed­wards said.

“I think by 2019 we will be plan­ning new build­ings.

“We are nearly down to 10 per cent va­cancy in pre­mium now. In an­other 12 months, we’ll be at 10 per cent in A-grade. That’s a healthy mar­ket.”

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