Average prime net effective rents in the Perth CBD will be amongst the lowest of all the major CBD office markets in Australia by 2018.
This dramatic change in fortunes emerges from BIS Shrapnel's latest research. Over the next three years, the company forecasts a slump in Perth's net effective rents of 40%, down to an average of $236 per square metre - well below levels forecast for Sydney, Melbourne and Brisbane and just below Adelaide and Canberra.
The rapid deterioration in Perth office rents is directly influenced by the market vacancy rate, which is expected to rise from around 18% now to 24% by June 2018. The forecast blow-out in the vacancy rate stems from supply outpacing demand.
Over the next 12 months, around 120,000 square metres of office space is due for completion in the Perth CBD, with a further 75,000 square metres due over the two years to June 2018. Although about 65% of this space is committed, BIS Shrapnel fears the market will have trouble absorbing the uncommitted space and backfill space created as tenants relocate.
BIS Shrapnel expects only modest net absorption of office space in the CBD between now and 2018, held back by weak employment growth. The problem for the Perth office market is that the downturn in resources investment has further to run, reaching a forecast trough in 2018.
Already, rising vacancies have caused prime average net stated rents to fall by 13% since the peak in 2012. However, effective rents have fallen much further - by 47% to June 2015, in the process shifting the mantle of the most expensive of Australia's major CBD office markets from Perth to Sydney.
