Headline vacancy trends lower in Q3 2024

• Headline vacancy in the Perth CBD decreased 0.2 percentage points (ppts) to 15.7% in Q3 2024. The prime grade vacancy rate also decreased 0.2 ppts to 13.1%, driven by new business entrants and expansionary activity by large occupiers (>1,000 sqm).
• Net absorption in Q3 2024 totalled 2,860 sqm; a significant decline from the previous quarter’s reading of 12,030 sqm. Nevertheless, although Perth CBD office demand has somewhat slowed, it remains positive.

New office supply additions expected to remain low

• The refurbishment of 619 Murray Street, West Perth completed over the quarter, totalling 4,036 sqm. In the Perth CBD, one project remains under construction totalling 31,204 sqm, expected to complete in Q2 2025.
• Other than the development currently under construction, there are 12 projects in the Perth CBD with plans approved, totalling 254,600 sqm. Nevertheless, proposed new office projects are likely to require substantial pre-commitment to proceed.

Muted investment activity in Q3 2024

• Prime net effective rents increased 0.8% quarter-on-quarter to AUD 285 per sqm per annum, with year-on-year growth of 1.4%. Prime net face rents increased 0.5% quarter-on-quarter to AUD 660 per sqm per annum, reflecting year-on-year growth of 1.6%.
• Perth CBD prime office yields were stable in Q3 2024 at a midpoint of 7.38% while secondary yields softened 12 bps to a midpoint of 9.00%. On an annual basis, prime office yields recorded a softening of 25 bps.

Outlook: Rental growth expected to accelerate over the short to medium term

• Prime net effective rents are forecast to continue accelerating, averaging an annual growth rate of 5.3% from 2025 to 2029, as base office demand remains robust along with a limited office supply pipeline.
• Investors are likely to still be selective in terms of potential acquisitions, albeit to a lesser extent than 12 months ago. The attractiveness of office assets is expected to continue improving as broader economic conditions stabilise.