Perth Office At A Premium Since Gfc

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July 13th, 2011

PERTH, the tightest CBD office market in the country, has been squeezed even further amid recording the strongest growth in rents nationwide.

Statistics released by global property group Jones Lang LaSalle indicated that Perth's CBD, which became Australia's tightest CBD office market in the first quarter, saw a further reduction in vacancy from 5.6 per cent in the first quarter 2011 to 5.4 per cent in the second quarter.

JLL national head of office leasing, Kevin George said the large resource companies continue to be very active.

"Investment spending in the sector remains at very high levels and businesses are moving quickly to secure space to accommodate their expected increase in head count," he added.

Prime gross effective rents in Perth increased by 3.9 per cent in the second quarter and have risen by 11.2 per cent since the trough in the rental cycle was recorded in Q3 2010.

Whilst the quarterly net absorption was well down on recent quarters, net absorption in the 2010-11 financial year was 279,700 sqm.

As a result of increased backfill space availability, the national CBD office market vacancy rate increased slightly to 7.6 per cent in Q2 2011 from 7.4 per cent in Q1.

Sydney recorded the strongest net absorption in Q2 (28,900 sqm). In the 2010-11 financial year, the Sydney CBD recorded 99,800 sqm of net absorption, or 37 per cent of the national total.

In Q2, the Melbourne CBD recorded a negative 11,600 sqm of net absorption and a rise in vacancy to 6.0 per cent.

The negative result in the Melbourne CBD was largely attributed to the relocation of the Spotless Group from 350 Queen Street to St Kilda Road.

In Adelaide, vacancy increased marginally to 7.0 per cent in Q2. However, the vacancy rate remains below the long-term average and has resulted in prime gross effective rents rising by 2.5 per cent in the quarter and 9.4 per cent over the past 12 months.

"Australian office markets have very low levels of spare capacity for this stage of the recovery compared to the vacancy peaks of previous market downturns," Mr George said.

"The legacy of the GFC will be limited completions in 2012 and 2013."