Not pandemic-proof, but resilient: Perth’s CBD office market holding up
It’s been a hell of a year on many fronts. The COVID-19 pandemic has thrown the economy into chaos, turned life upside down and given rise to a range of questions that weren’t on the radar of any business 12 months ago. For the commercial property industry, one of those big questions was how CBD office markets were going be impacted.
In Perth, prime city offices stood empty for a good part of the first half of 2020. While buildings are now beginning to slowly fill up again, landlords and CBD businesses are still unclear as to what the answer will be.
Figures released today by the Property Council of Australia provide the first tangible information around that impact – and for the Perth CBD market, the early news is surprisingly positive.
The PCA’s Office Market Report revealed our CBD office vacancy rate for the first six months of 2020 remains broadly in line with 2019 figures.
The overall vacancy rate, which last year fell below 19 per cent for the first time since 2015, was 18.4 per cent at July 1, only a small increase on the rate of 17.5 per cent recorded in February.
Perth’s premium office space vacancy actually dropped from February to July (7.4 per cent to 6.8 per cent), while A-grade space held at 15.8 per cent and B and C-grade experienced slight increases.
More than 17,000sqm of supply was added from January 1 to July 1, with more than 12,000sqm withdrawn, while total vacancy accounted for more than 330,000sqm.
Property Council WA Executive Director Sandra Brewer said early signs indicated the office property market was standing up well in trying economic times.
“Perth was the only capital city in the country to report a reduction in space available for sublease,” Ms Brewer said.
“Perth’s CBD market, which was thought to be on the cusp of a turnaround before the pandemic, has so far experienced relatively moderate effects.
“The industry will be monitoring tenant demand and sublease vacancy over the next six months as the economic impact of the pandemic plays out.”
WA’s economy has proved resilient to the pandemic so far. Resource exports from the State, particularly iron ore, were a major factor in Australia posting its biggest-ever trade surplus in the 2019-20 financial year.
The economy will also be boosted by the WA Government’s commitment to push on with major projects like METRONET as part of its $5.5 billion WA Recovery Plan.
Outside the CBD, West Perth’s vacancy rate increased notably from 17.9 per cent in February to 22.1 per cent in July (up from 16.9 per cent in July 2019), although pre-pandemic moves by four tenants back to the city centre were a factor in that data.
It’s clearly early days, and it’s worth noting that the PCA measures vacancy rates by whether a lease is in place for a particular space rather than whether the tenant’s employees are actually occupying the space.
It’s likely a fuller picture of the impact of COVID-19 on the Perth office market will emerge in months and years to come, as businesses assess the need for office space in the wake of the world’s largest work-from-home experiment.
But the PCA data does perhaps provide further reason to be optimistic about the future of a WA property market that has recently been the beneficiary of a number of government stimulus measures.
It’s also yet another positive sign for the WA economy – and positive news is something we can all use more of.
You can download a full report of the Property Council of Australia Office Market Report here.
Fran Lawrence leads Cannings Purple’s Corporate Affairs team and has more than 20 years’ experience in media and communications. She is an expert in communication in the property sector. Contact Fran.
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