The Perth office markets have been under increased pressure over the past three years as demand levels have softened during a time where supply additions were ramped up across both the CBD and West Perth market. Vacancy levels are now at highs which have been witnessed in the past due to the volatile nature of this market.
This has affected the rental market with large decreases in face rents and high incentives resulting in effective rents falling to new lows, however these movements in market fundamentals has not stopped investment yields decreasing affected moreso by external influences rather than the local market.
The Fringe Strata office market has also shown surprising results with volumes up and capital values reasonably consistent over the past three years, albeit well below rates achieved during the peak of the market.
The Perth CBD office market has undergone a transformation over the last ten years adding over 450,000sqm to the market. The CBD now represents 1.741 million sqm with 113,463sqm added alone in the last six months through major projects including Brookfield Place, Tower Two (33,600sqm) and Old Treasury Building (30,588sqm) while the property at Kings Square, Tower 1 was yet to reach practical completion upon the completion of these numbers however will add another 22,612sqm in the next periods numbers. Despite this strong level of completion the withdrawal rate has been minimal as new supply has been borne from new precincts of the CBD, however given the increases in vacancy particularly in the secondary grade there could be greater withdrawals due to refurbishments.