Property Forecasting > Report
The recovery in the Perth office market is coming through but will take time. A quick rebound looks unlikely. That said, office employment grew at a surprising pace during FY2019, well ahead of total employment and economic growth. Metropolitan-wide net absorption is insipid, favouring the CBD as businesses recentralise. But this has been met by rising supply, keeping the CBD vacancy rate at 18.4%.
Even though premium vacancies in the CBD rose to June 2019, they remain less than half the market average. As a result, building owners continued to wind back incentives. At the same time, prime net stated rents rose a little with stronger gains in prime effective rents. B grade space continues to languish.
The investment market has been subdued this year, with available evidence suggesting prime and B grade yields firmed modestly, underpinning moderate price growth.
The key driver for office employment and net absorption in Perth is growth in investment. The next round of resource projects are coming through and are set to drive solid growth over the four years to 2023 , but not at the same magnitude of the previous boom. After this FY office completions are set to fall, allowing the oversupply to be absorbed. However, we expect it will take until 2026 for the total CBD vacancy rate to fall below 10%.
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