Demand for Perth CBD office space continues to grow

Demand for office space in Perth continued to rise in the first quarter of 2022 according to new data.

JLL Research’s quarterly analysis shows the Perth CBD recorded positive net absorption of 9300sq m in the first quarter of the year – the strongest quarterly net absorption result since 2018.

Across the entire country, there was positive net absorption of 14,200sq m of CBD office space in the first quarter, highlighting Perth’s strong performance compared to the rest of the country.

JLL Director – Research, Ronak Bhimjiani said the mining sector had played a big role in the growth of the WA economy and demand for office space.

“There are no signs of stopping WA’s economic growth momentum with major indicators pointing upwards for some time now,” Mr Bhimjiani said.

“The value proposition of WA has been boosted significantly since the onset of the COVID-19 pandemic, with the mining sector playing a key role in driving economic growth.”

Mr Bhimjiani said the iron ore sector had been one of the major growth drivers for WA.

“JLL Research’s analysis of company accounts shows that the major iron producers cost of production is in the region of USD 31-48/Tn, a level that is significantly lower than the current iron ore spot price of USD 134/Tn,” he said.

“The mining sector’s share of WA’s economic output has grown from 35 per cent in 2015 to 42 per cent in 2021, while the sector is also the largest occupier of Perth CBD office space.

“With company revenues and earnings on the up given the large spread between the cost of production and current spot price, it is no surprise to see this translate into buoyant CBD office market conditions.”

Source: JLL Research.

Formal Tenant Representation briefs across WA, which can be a leading indicator of future office space demand, were 17 per cent higher versus the same time last year.

JLL Head of Office Leasing – WA, Nick Van Helden said the overall increase in activity was an encouraging sign and further demand-led upside was expected.

“The top three industry sectors that contributed towards overall net absorption included the professional services, mining and IT sectors,” Mr Van Helden said.

“Furthermore, we are seeing additional inquiries from mining sector tenants looking to expand operations, while the financial sector is also active in the current market.”  

JLL Managing Director – WA, Angelo Amara said the state continued to perform strongly relative to the rest of the country.

“The analysis of deal activity within our own business in Q1 2022, showed that Perth CBD recorded 14 per cent of national deal activity, while WA’s economic output represents approximately 10 per cent of national economic output,” Mr Amara said.

“It is pleasing to see deal activity trend above WA’s share of national economic output. This shows the momentum that is occurring in the Perth CBD office market, despite the WA border having remained closed for the large part of Q1 2022. 

“With the WA border now having re-opened, we are expecting to see further upside in office leasing demand.”

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.