Perth, 6 April 2014- CBRE’s latest Office MarketView reports that investor interest in Perth was strong in 2013.
Sales volume reached almost $1.4 billion across the year, exceeding the previous high of just over $1.2 billion in 2011. Only five major transactions (above $5 million) were recorded, however, two of these become the highest office sales on record in the Perth CBD.
According
to the author of the report, CBRE’s Associate Director of Research, Claire
Cupitt, these transactions demonstrate the confidence major institutions have
in the long-term economic growth fundamentals in WA. However, the market is
expected to slow in 2014.
“As we move throughout the year, we expect activity to ease slightly with limited stock expected to enter the market,” said Ms Cupitt.
Yields moved slightly, tightening by five basis points and ranging from 6.50% to 8.75% in Q4 2013, the first move in over 12 months. This was due to considerable demand from investment funds for premium assets with long term leases in place.
In contrast, secondary yields softened, ranging between 8.75% and 10%. This was mainly due to the lack of rental growth potential due to the fact tenants are able to occupy newly constructed space at similar rents.
In the office leasing market, the total CBD vacancy rate rose from 6.9% to 9% over the second half of the year, with negative net absorption of 33,938sqm.
CBRE reports that an estimated 70,000sqm of sublease space is available and while it is a significant factor, it is likely the level peaked in 2013 and has started to recede.
“Recent demand has been driven by companies reliant on contracts from the resource sector seeking to relocate or downsize to cut occupancy costs. Looking forward, it is likely demand levels will show improvement from mid-2014 in line with broader economic and resource sector trends,” said Ms Cupitt.
West Perth saw vacancy levels rise from 7.6% to 9.2% over the last six months, with negative net absorption of 1,866sqm. Whilst suburban markets have softened, a more diverse range of tenants away from the resource sector makes these markets less volatile. However, tenant demand is flat with rents stable in most markets.
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