Perth CBD office demand conditions on the up during Q4 2023

• Headline vacancy in the Perth CBD was stable at 17.3% in Q4 2023, despite quarterly net absorption totalling 7,100 sqm over the quarter. This was driven by the completion of new office stock in Q4 2023.
• Expansionary and centralisation activity into the Perth CBD market were significant contributors to net absorption over Q4 2023. Occupier activity was predominantly led by tenants within the government and professional services sectors.

A continuing uptick in new office supply

• One significant office development completed in the Perth CBD over Q4 2023, totalling 9,100 sqm. The existing supply pipeline is elevated with five projects under construction totalling 129,600 sqm.
• Other than developments currently under construction, the supply pipeline for both the Perth CBD and West Perth office market remains limited given elevated vacancy rates. Plans are approved for a further ten projects in the CBD, totalling 160,000 sqm. Proposed new office projects are likely to require substantial pre-commitment to proceed.

Perth CBD office rents increase

• Perth CBD prime net effective rents increased to AUD 282 per sqm per annum (0.5% q-o-q), with y-o-y growth of 3.8%. Prime net face rents increased 0.2% q-o-q to AUD 651 per sqm per annum, reflecting y-o-y growth of 2.8%.
• Stabilising cost of debt pressures saw Perth CBD prime office yields hold steady in Q4 2023 at a mid-point of 7.13%.

Outlook: Demand supported by robust WA economic conditions

• Western Australia’s (WA’s) economic growth has continued to outperform the national average, driven by ongoing strength within the resources sector. With a strong pipeline of resources projects approved, demand for office space is likely to be led by the mining and professional services sector.
• With economic factors such as inflationary pressures and borrowing costs stabilising, the attractiveness of office assets to buyers is expected to improve. However, investors are likely to still be selective in terms of potential acquisitions, as both buyers and vendors continue to undergo price discovery.