Perth’s office sector is set to pip the rest of the country’s major CBD markets in 2019 – recording the highest prime rental growth nationally amid a resurgence of the state’s resources sector and gaining momentum in coworking.
Speaking at CBRE’s annual Market Outlook event in Perth, CBRE’s Australian Head of Research Bradley Speers said Perth’s office market was continuing to gain ground.
“The supply pipeline over the next few years for Perth is relatively dormant, which is a good thing when you’re sitting in a market with a headline vacancy of 18%,” Mr Speers said.
“With strong demand at the top end of the market, premium vacancy is sub-5% in Perth – similar to levels seen in Sydney and Melbourne. This is helping to bring incentives down from highs north of 50%, to mid-40% – and driving effective prime rental growth.
“This is expected to continue in 2019, with the Perth CBD prime effective rental growth outperforming the rest of the country.”
He noted that flexible working was having a considerable impact on office space demand in the Australian office sector.
“In Australia, coworking is the growth tenant – accounting for almost one-fifth of net absorption in the market last year. In Sydney and Melbourne, we’re seeing coworking operators move into non-CBD areas and in Brisbane, there has been the first example of an operator opening in a shopping centre. Expansion of coworking is a growing global trend we’re going to see moving forward,” Mr Speers said
CBRE Senior Director, Advisory & Transaction Services – Office Leasing, Andrew Denny said coworking has only just begun to impact the Perth market and will become an increasing driver of office space usage moving forward.
“Coworking has typically been regarded as space targeted to startups and entrepreneurs, however, the majority of demand is actually from the corporate sector,” Mr Denny said.
“There is already around 8,000sqm of coworking space in the Perth market, with this expected to increase by an additional 11,000sqm over the next six months. In the medium term, at least 2% of the CBD market could be coworking if trends in other markets are followed in Perth.”
Referencing the results of CBRE’s 2019 Investors Intentions Survey, Mr Speers noted for the first time in several years, all major capital city CBD office markets around the country would record rental growth – underpinning investment, both from domestic and offshore investors.
“The rental growth story panning out this year will underpin investment in Australia’s office markets, with Perth looking increasingly attractive amid the yield spread between east coast markets. More Australian investors are looking to Perth for investment,” Mr Speers said.