Global Research Finds Perth Still World’s Tightest Office Market

Colliers International Commercial Research Director Felice Spark reported that Perth had recorded the lowest vacancy in the world, now at 0.3%, for the third time running in the biannual Colliers International report which covers 172 office markets across the globe.

The city’s record vacancy was ahead of the CBD markets in Bucharest and Santiago which both posted a 0.5% vacancy and Seoul at 0.7%.

Brisbane previously held the second lowest vacancy at 0.7% when the last Colliers International Global Office Real Estate Review was released in March, however the city now sits at number 6 with a vacancy of 1.2%.

Melbourne came in at number 18 with 3.1%, Adelaide at 24 with 3.9% and Sydney at 26 with 4.3%

Perth moved up the rankings for most expensive CBD office markets in the world, coming in at number 18 with an average A grade gross rent of $US 80.34/sf (AUD $900.00 sqm).

The most expensive average A grade gross rent was recorded in Hong Kong at $213.68 USD/ sf.

Brisbane, who ranked number 14 in the last report moved down into number 26 with an average A grade gross rent of $66.95 USD/ sf (AUD $750.00/sqm).  Sydney came in ahead, ranked 24th most expensive at of $68.74 USD/ sf (AUD $770.00/sqm). 

Simon Hunt, Colliers International Managing Director – Office Leasing, says the findings show the Australia is holding strong amidst volatile global conditions.

“The fundamentals are still very sound and, on the whole, I think we are seeing the Australian office market settle into a comfortable position on a global scale,” Mr Hunt said.

“We still have a reasonably strong economy.  Unemployment rates are still very low, and we have only seen minimal retrenchment occur in the financial sector,” he said.

“This is playing out in an ongoing strong level of office leasing enquiry.  We haven’t seen it drop off at all, particularly for good quality stock.”

Ms Spark said despite the year long volatility shown in financial markets around the world, many office markets continue to post solid fundamentals.

“While demand for office space was below the record pace witnessed for much of 2005-2007, the first half of 2008 was back to trend in many markets,” she said.

According to the report, much of Asia Pacific, Central and Eastern Europe, Latin America and the Middle East continued to register robust leasing conditions with lower vacancies and higher rents, while only major financial centres in Western Europe and North America reported signs of weakness.

“To date, developing economies remain largely unfazed, and continue to show solid growth and a healthy appetite for office space,” Ms Spark said.

A similar pattern exists for office building sales, with investment volumes holding up in Asia Pacific but down in much of Europe and North America.

Looking forward to the latter half of 2008 and 2009 office markets in all regions are expected to become more subdued as the global economy slows and lenders remain cautious.

The Colliers International research found Asia Pacific region posted uneven results during the first half of the year with the regional average vacancy rate decreasing by 20 basis points to register 7.9%.

However, according to Ms Spark, this decrease was after the region’s vacancy rate jumped by a full percent in 2007.

“The drop in vacancies during the first half of the year were largely the result of most Australian, Chinese and New Zealand markets reporting substantial lower vacancies compared with that reported at the beginning of the year,” said Ms Spark.

Most major financial centres such as Hong Kong, Singapore, Tokyo, Shanghai and Sydney, however, showed more vacancy than six months ago with Hong Kong the only exception with a 20 basis point decline.

Office rents within the region generally maintained an upward trend with just three exceptions. Tokyo, Singapore and Seoul all registered declines in rents ranging from 3% to 19%.

The Asia Pacific region remains characterised by high levels of office construction with Beijing, Delhi,
Guangzhou, Seoul and Shanghai, where at least 10 million square feet of construction is currently underway in each market, 99 million square feet in total.

On the demand side, Ms Spark said most economies across the region are expected to continue posting very high growth rates, although not at levels witnessed for the past several years.

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Marc Pallisco

A former property analyst and print journalist, Marc is the publisher of