Commercial Property Outlook 2008 - Western Australia

Western Australia’s commercial and industrial property sectors enjoyed unprecedented demand in 2007 and this is expected to continue in 2008 as demand exceeds supply. Office space vacancies are at an all time low in Perth and West Perth – at about 0.5 per cent – benefiting surrounding areas.

Of the 854,835 square metres of prime commercial office space available in Perth, only 89,097sqm is available, and that is only expected to be ready for occupancy in the first quarter of 2009.

The resources boom is filtering to all sectors of the economy and is causing people to migrate from interstate and overseas.

This is impacting on the availability of office space and forcing tenants in the banking and resource sectors to accept lower grade stock or wait until 2009 and 2010 for suitable office space.

Despite this trend which is expected to continue for 12 to 18 months, funds have been the largest purchaser of stock in this sector.

In the industrial sector, strong demand from local and interstate property investors is resulting in tightening yields with premium grade buildings ranging from 6.5 per cent to 7.5 per cent late in 2007.

Warehouses, factories and transport buildings under construction are at their highest level since 2004 and are a result of the increasing economic activity. This activity is evident at Perth Airport, Jandakot, Forrestdale and Wangara Industrial precincts all of which are linked with major arterial road and transport links.

The continuing mining and exploration activity is having a flow on effect to the retail market with annual turnover growth increasing to levels higher than the 10 year average of 6.26 per cent according to the ABS.

Whilst retail spending is expected to slow with rising interest rates, the construction and opening of a new Coles distribution centre in late 2008 near Perth Airport is an indication of the confidence that this retailer has in the local economy.

Neighbourhood shopping centres are a feature of the Western Australian retail market and are due to the smaller population centres outside of the metropolitan areas.

Many of these service regional towns and as resources come on line so to will these centres. Also of significance is the development of bulky goods centres with over 40,000sqm of stock either planned or under construction.