Perth office market set for an uphill recovery
Perth’s office market has struggled to rebound from the impacts of the pandemic due to unoccupied stock despite Western Australian’s robust economy.
The Perth CBD lost over 32,900 square metres of occupied stock in the last six months, resulting in vacancies growing to 20 per cent, according to Ray White Commercial’s latest Between the Lines report.
The subsequent lockdown in Perth in early 2021 prompted businesses to consider flexible working arrangements for their employees, impacting demand and reversing the strong return to the CBD witnessed in late 2020.
Additionally, Perth’s rising office vacancy rate has been influenced by a cost savings trend, which has prompted businesses to consolidate their office space or relocate to more affordable markets.
This trend has put the Perth CBD office market in a particularly “tough position”, Ray White Commercial (WA) associate director for office leasing Sallese Wilmot-Barr said, as new and refurbished stock additions impede market recovery and rental growth.
“The onset of COVID-19 [has put] pressure on businesses and occupation, this has driven vacancies up, together with the continued new supply pipeline, which will further hamper a timely recovery to this market.
“As a result, rental rates are under pressure,” Ms Wilmot-Barr noted.
Slow recovery
As for the office market located outside of the CBD, West Perth saw one of the highest vacancies.
“Many tenants in West Perth want to be in this precinct, and the ongoing withdrawal and refurbishment of stock over the last few years (and in the medium term) will continue to add attractive and fresh accommodation options into the market,” Ms Wilmot-Barr said.
Looking ahead, this stabilising unemployment rate and the overall strength of the WA economy will usher a strong revival for the Perth office market, albeit at a slower pace than expected, the associate director said.
Ms Wilmot-Barr predicted that the period of recovery will likely be prolonged by the high vacancy rates in Perth markets.
“Supply will be an influencing factor of the short to medium term while demand levels remain subdued. The future of office stock will be one to watch over the coming years,” she said.
Finally, the pandemic will continue to impact the market as it exerts an influence on the way employees and employers interact with their office environment.
“Many occupiers are still uncertain on the best way forward with their tenancies, as some move away from hot desking and small meeting spaces for larger, more expansive and open workspaces, while others navigate the ‘part-time in office’ workforce and the upgrades needed to hygiene and cleaning to make sharing desks a viable option.
“Over the coming years, we expect a greater focus to be on automation and flexibility of floorplates to cater for less touch points and allow physical distancing, while still being able to rationalise cost and reduce,” Ms Wilmot-Barr concluded.
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