When headlines tell us the office property market is doomed, one merely needs to look west to see there’s more to the story. Much more. Here’s how the Perth office market is running its own race in 2023, outperforming almost every other office precinct in the country.
Perth’s office market has proven itself to be a vibrant and resilient sector in 2023, defying some of the trends seen in other regions during the work-from-home era.
While the industrial sector’s positive performance is well known, the office market in Perth has displayed solid resilience (something barely promoted by our media). Unlike many other regions affected by the flexible work arrangement trend, Perth is seeing much higher occupancy rates across its many precincts and higher demand than most other asset classes.
West Perth, a sought-after location known for its small-cap mining industry, has seen many of new occupants appear after racing out of poorer quality premises elsewhere in Perth and straight into newer, more contemporary workplaces offered by the popular precinct. Office spaces in the area are in high demand, as are its surrounding areas on the edge of the Perth CBD.
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It’s backed up by the industry’s leaders. In a recent webinar hosted by Ray White Commercial, experts shed light on the performance of different commercial asset classes in Western Australia.
Brett Wilkins, Ray White Commercial WA director and the driving force behind Western Australia’s largest commercial real estate deal, highlighted the reasonable demand for office investments and the keen interest in the western districts of the Perth CBD, particularly from smaller investors and owner-occupiers.
Perth’s office property market remains an attractive investment destination, with the work-from-home movement having a far lesser impact compared to its east coast neighbours. But why is the Perth office sector showcasing such resilience, investor demand and a flight to quality? What’s so special about this asset class in this area of the country?
Limited further supply
Perth’s office market has currently no scheduled new premises due for completion in 2024. That’s a huge hole in the market’s supply chain. There’s over 150,000sqm of development applications planned for 2025 and beyond, but there’s a good chance of delays for much of these builds, due to rising construction costs, inflation and interest rates.
Strong employment (leading to strong demand)
WA’s economy is in a fine position, boasting the strongest employment growth over the past three years with an unemployment rate of only 3.6 per cent.
As a result, the demand for office space remains incredibly healthy, with high white-collar employment and continued strength in the mining sector contributing to a vacancy rate of 15.6 per cent across Perth CBD assets (a large improvement for its circa-20-per-cent vacancy between 2018 and 2020).
Prime Net Effective Rents in Perth are up 1.4 per cent year-on-year, sitting at $338 per sqm as of this writing.
And as new supply slows and employment bolsters, the demand for Perth office space is expected to retain very healthy well into 2023 and 2024.
Perth is still an untapped market
When all the right ingredients are added to a commercial real estate market, it’s a recipe for investment success: When hints of demand are everywhere but not advertised; when tenants are picking higher quality premises in previously unattainable areas; when signs of economic growth are pointing to a bright future.
This is exactly what occurred in Australia’s industrial market only a few years ago. And today, the industrial sector is without a doubt the most popular segment of the commercial property market – but it’s also now out of reach for most investors, with its growth period having well and truly hit its peak. (We exited the industrial market in 2022, divesting our entire industrial portfolio for $78.8 million – providing a total investor return of 100%.)
Now, it appears it could be the Perth office market’s turn for spectacular investment demand. All the right ingredients are there, while exceptional investment opportunities exist for those who know how to find them.
So, are you going to act and participate? Or are you going to wait to read about it in the headlines?
We have opportunities available in the Perth office market today. Get in touch with us to find out how you can invest alongside us, and rewrite your financial future.
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