State Government drives building activity in Perth’s suburban office market

State Government drives building activity in Perth’s suburban office market

Competition remains strong to secure suburban office tenants. 

Government office upgrades and projects to accommodate government decentralisation mandates are delivering new stock to Perth’s suburban office market according to research from Colliers International, which also forecasts a continuation of the challenging conditions in the suburbs in the medium term.

The Metro Office Research and Forecast Report found the State Government was behind most of the new office construction activity (in buildings from 1,000sqm) in Perth’s suburban markets.

The government developments include the 6,535sqm building at 5 Milldale Way, Mirrabooka, the 9,600sqm building at 8 Davidson Terrace in Joondalup and 2 Newman Court in Fremantle, which is due to be finished in 2020 and will be the biggest new addition with approximately 20,000qm of office space.

Colliers International Senior Research Analyst Quyen Quach said in the past two years, 43,115sqm of suburban office space (in buildings from 1,000sqm) had been delivered and 37,140sqm was under construction.

“While the CBD and West Perth markets have benefited from tenants relocating to more central office precincts, suburban office markets are still feeling the effects from lower economic growth in 2018 and low or negative tenant demand,” Mr Quach said.

A recent survey of Subiaco office buildings (from 1,000sqm) found a 17.4 per cent vacancy, the equivalent to 31,950sqm of space compared with the last survey in 2015, when it had a vacancy of 15.1 per cent or 24,425sqm. 

Private sector developments in the suburban market in the past two years include 25 Rowe Avenue, Rivervale which is anchored by Bunnings, 5,000sqm in a mixed-use development at 1 Hood Street, Subiaco and SubiXO at 500 Hay Street, which will have 10,325sqm of office space and is reportedly due to be finished this year after a lengthy delay. 

Colliers International Office Leasing Executive Harry Mettam said in the suburban market, which was mostly driven by niche tenants, landlords were competing within their own markets and with CBD office buildings offering competitive rates and incentives in B and C-grade stock.

“In response to this competition, a growing number of suburban landlords are recognising the value in upgrading office buildings to avoid long-term vacancies,” Mr Mettam said.

“There has also been a moderate increase in enquiry from the professional services sector in the suburban office market.”

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