The recovery of Western Australia’s commercial property market is well established as 2017 comes to a close, following 12 months of consistent transactional activity.
We have witnessed the typical signs of an industry comeback, including flight to quality, recentralisation, and landlords investing heavily in building refurbishments and upgrades.
2017 has been and will historically be viewed as the year WA turned the corner, with the first green shoots of recovery taking hold.
Many tenants had seized the opportunity to upgrade the quality of their buildings and locations in response to the competitive terms on offer in the market.
While generally the market remains tenant-favoured, as buildings reach targeted levels of occupation, their desire and/or need to compete at cyclical lows decreases.
In 2018, we predict tenants will need to act quickly to ensure they secure their preferred choice of building, particularly at the premium and upper A Grade sectors of the market.
Tenants who had been forced to move from the CBD during Perth’s mining boom period, either due to cost or availability, had taken advantage of the current market conditions to recentralise back to the CBD.
Second-tier businesses within all industries have seen this as a prime opportunity to reposition their organisations and compete head on with their larger counterparts.
Landlords had also recognised the need to reinvest and future-proof their assets.
Property owners need to ensure they maintain market relevance throughout the next property cycle, in terms of both retaining existing and attracting new tenants.
From an investment perspective, Perth has seen an increased focus from domestic and international investors, with transactions increasing markedly from 2016 and interest levels well above historical averages.
Perth provides a significant value proposition relative to the eastern seaboard, fully factoring in current market risk.
Savills Perth’s formal 2017 campaigns, including 109 St Georges Terrace, 144 Stirling Street and, most recently, Coles Riverton, have seen the first-round number of bids received exceed those during similar campaigns in the city’s “boom years”.
This clearly indicates there is a significant and increasing level of unsatisfied demand from buyers, who continue to seek opportunities.
This is a trend that will only increase further in 2018, given the improving labor market indicators, resource sector outlook and decreasing office vacancy.