Western Australia has been an outstanding performer when it comes to office market activity over the last year, second only to Queensland markets. For the CBD, Perth sits behind Brisbane for annual net absorption for the 2022 calendar year at 19,388sqm moving further ahead of the trophy office markets of Sydney or Melbourne CBD. This continued level of take up has been across the city and size ranges with demand coming from a mix of professional and technology services both for new and growing businesses. Perth’s rigid border controls has allowed the office markets to continue working at full force with lockdowns and working from home not featured as prominently as the East Coast.
Still, we are seeing other markets grapple with getting their staff back into physical office space, many changing their workplace environment and allowing hybrid models for the short to medium term impacting the vibrancy and longevity of their office markets. However, the Perth market and its robust economy continue to grow, resulting in an unemployment rate of just 3.5%, the lowest rate on record for well over ten years. West Perth has also seen a push by smaller businesses with positive take up also recorded, again one of the top 3 nationally for demand behind the much larger Brisbane Fringe and Parramatta office markets.
While vacancy has recorded a prolonged high for the CBD with expectation of this continuing given the supply pipeline, West Perth has shown encouraging results. Both markets have seen improvements across the rental market given the strong inflationary pressures with existing tenancies faced with high CPI increases in their accommodation costs. Despite these increases to face rents there has been little change in effective rents as incentives remain a significant feature notably in the CBD market.
For the investment market, the strong increases in interest rates hasn't done much to dampen urgency in the marketplace. Yields have seen upward movement given this cost of finance however many investor groups continue to look towards Perth to capitalise on attractive yields compared to other East Coast options particularly given the markets strong income growth potential. Domestic funds and private investor groups are expected to seek out opportunities both in the CBD and West Perth.
Demand from owner occupiers for mid tier asset classes has featured strong demand particularly in West Perth and fringe CBD locations as buyers capitalise on relatively low interest rate from historical standards.
