Perth cbd office market research forecast report h2 2012 final

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  • 1. SECOND HALF 2012 | OFFICEResearch & Forecast ReportPERTH CBD Office Historically High Supply, Historically High Net Absorption The Perth office market has continued to outperform all other major Australian capital cities in the first half of 2012. On top of this, the delivery and occupation of two recently-completed buildings, together with strong demand, has resulted in a record net absorption. According to the latest Property Council of Australia (PCA) survey, net absorption increased to 115,503m2 in the six months to June 30, 2012. This has been instrumental in keeping the Perth vacancy rate tight, despite the historically high new gross supply of 157,926m2. The vacancy rate at the end of June 2012 was 4.2% according to the PCA survey, up from 3.3% in January 2012. The current (June) level of office vacancy in the CBD, according to the PCA, is 66,902m2 –St Georges Square however, actual availability of space is lower than this figure.225 St Georges Terrace, Perth50% share sold to Charter Hall in March 2012 for Investment-led economic activity in WA has persisted, despite a reported slowing of economic$96 million, initial yield was 8.86% with capital growth in China and a recession-hit European Union, where German economic activity seems tovalue of $9,048/m2. also be slowing.Market Indicators Forecast - 6 months Perth’s CBD office market has been resilient in the face of poor global economic conditions and Overall Performance sentiment. The key driver behind this resilience has been the spatial demands of project space and support services, contingent on the current capital expenditure programs of projects such as New Supply Gorgon and Wheatstone. Rents in the CBD are now nearing the peak levels seen in 2008, and Tenant Demand average rents are expected to overtake those peak 2008 levels during the fourth quarter of 2012 should demand continue to be strong. Vacancy There is now clearly a two-tier office rental market in place in Perth, with premium rents being AVAILABILITY* obtained for short-term available space compared to medium-long term design and construct Incentives space, where asking rents are softer. Face Rents Premium Grade space vacancy was 1.2% in June 2012, according to the PCA survey. This has Effective Rents driven Premium rents to between $765/m2 and $920/m2 in the June 2012 quarter, with A Grade rents increasing to between $700/m2 and $805/m2. Capital Values Yields First half 2012 investment transactions were minimal compared to the first half of the 2011. As of June 2012, three major transactions had been completed at a total value of $140.05 million.* Technical vacancy measures may differ from actual availabilities. PERTH CBD Office Market Indicators AverageKey Highlights Average Net Face Average Incentives Average Capital Average Market Grade Outgoings Core CBD vacancy increase to 3.8% Rents ($/m2 pa) (%) ($/m2 pa) Values ($/m2) Yield* (%) Rents approaching historical high on Low High Low High Low High Low High abnormally strong net absorption Premium $765 $920 0% 10% $165 $9,450 $10,750 7.50% 8.50% Historically strong supply in 2012, most has A Grade $700 $805 0% 10% $155 $8,500 $9,750 8.00% 8.50% been absorbed B Grade $545 $605 0% 10% $140 $5,875 $7,250 8.50% 9.50% New supply cycle eminent but still two *Equivalent Reversionary Yield years away from delivery Data correct as of June 2012 Source: Colliers International Researchwww.colliers.com.au/research
  • 2. research & forecast report | SECOND HALF 2012 | OFFICE | PERTH CBD Economic Update Strong Q1 2012 GDP RESULT Preferred Contractors March Quarter 2012 Australian Bureau of Statistics (ABS) Gross Domestic Product (GDP) data The showed robust growth for the Australian economy during the quarter. In seasonally adjusted terms, GDP increased 1.3% during Q1 2012, up from 0.6% in Q4 2011, taking through-the-year GDP growth to a strong 4.3% – the largest annual result since September 2007. The main contributors to expenditure on GDP during the quarter were household final consumption (0.9 percentage points) and private gross fixed capital formation (0.8 percentage points), while net exportsRegistration Technologies Terms & Conditions The main industry contributors to GDP were mining (up 2.3%), financial detracted 0.5 percentage points. and insurance services (up 1.7%) and professional, scientific and technical services (up 2.8%). EMPLOYMENT REMAINS TIGHT The July 2012 monthly ABS Labour Force data shows the Australian employment market continues to remain tight. The latest results showed the unemployment rate declined by 0.1 percentage point, from a revised 5.3% in June to 5.2% in July 2012. This saw total employment increase by 14,000 persons, with both full-time employment (up 9,200 persons) and part-time employment (up 4,800 persons) increasing during the month. INFLATION RATE REMAINS LOW The latest inflation data from the ABS shows annual headline inflation rose just 1.2% during the 12 months to June 2012, down compared with a rise of 1.6% through the year to March 2012. This saw the Consumer Price Index (CPI) grow by 0.5% during the quarter, and ensures that the inflation rate remains QV1 well below the Reserve Bank of Australia’s target range of 2% to 3%. Underlying inflation was also 250 St Georges Terrace, Perth contained, increasing by 0.6% during Q2 2012, taking annual growth to 1.9%. Vodafone Hutchinson have renewed their lease at QV1 on level 18 for a rate of $920/m2. CASH RATE REMAINS STABLE Following a reduction of 50 and 25 basis points in May and June 2012 respectively, the RBA decided to keep the official cash rate stable at 3.5% during both their July and August monthly board meetings. The RBA judged that “with inflation expected to be consistent with the target and growth close to trend, but with a more subdued international outlook than was the case a few months ago, the stance of monetary policy remained appropriate”. AUSTRALIAN DOLLAR SOFTENS Ongoing uncertainty over European sovereign debt issues has continued to fuel concerns regarding the global economic outlook. When combined with the slow pace of economic recovery in the United States, this uncertainty saw the Australian Dollar reach a record high in late July 2011, trading at $US1.10 before slipping below parity in December 2011. After regaining value during Q1 2012, trading as high as $US1.08, the Australian Dollar fell below parity in May 2012 due to a flight by investors Help you assets as Let us to safe haven election results in Greece and France further clouded the outlook for the European economy. This has seen the Australian dollar recently trading between $US0.98 and $US1.05. WESTERN AUSTRALIA The latest economic statistics released by the ABS indicated WA state final demand grew a seasonally adjusted 7.8% over the March 2012 quarter. The State Government Budget for 2012/13 has forecast GSP growth of 6.0% for 2011/12 and 4.75% for 2012/13. Deloitte Access Economics is forecasting a slight moderation in WA’s growth rate to 4.6 % in 2012/13, down 0.3% from 2011/12 with growth projected to average just under 4.3% out to 2016/17. This is still well in excess of national GDP forecasts.   WA’s Private Capital Expenditure remains driven by the mining sector, with total mining sector spending increasing over the March 2012 quarter to $10.764 billion – up from $10.452 billion in the December 2011 quarter. This increase was offset by a contraction in the manufacturing and other sectors, which led to total spending falling marginally to $13.225 billion from $13.395 billion. Given the range of projects already underway and those either mooted or under consideration, the outlook for WA, according to Deloitte Access Economics, is good.  Colliers International | p. 2
  • 3. research & forecast report | SECOND HALF 2012 | OFFICE | PERTH CBD Employment Trends and Leasing Demand WHITE COLLAR EMPLOYMENT According to Deloitte Access Economics, white collar employment grew just under 2.3% in the first half of 2012 on continued strong State economic conditions. Going forward, growth over the next six months is expected to moderate slightly to around 1.3%, however economic conditions are forecast to remain robust in WA despite difficulties in external economies. The high net absorption forecast for 2012 below is the result of the delivery of two major buildings, which are mostly committed, together with very strong levels of demand. Perth white collar employment growth v net absorption 130,000 5% White Collar Employment (6 mth % change) Forecast 110,000 4% 90,000 3% 70,000 Net Absorption - m2 50,000 2% 30,000 1% 10,000 0% -10,000 -1% -30,000 -50,000 -2%108 St Georges Terrace, Perth Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15Rio Tinto have sub-leased 5 of the floors vacated byBankwest which expires at the end of 2014. 6 Mth Net Absorption Perth CBD & West Perth White Collar Employment Growth Source: Deloitte Access Economics, PCA, Colliers International Research WEST AUSTRALIAN EMPLOYMENT CONDITIONS STRONG Unsurprisingly, WA remains at the forefront of the country’s economic performance, with the major drivers continuing to be energy, minerals and the infrastructure development required to capitalise on the State’s comparative advantage. Resource industry reports of increasing project development and operating costs may begin to put something of a brake on industry investment and hence hiring intentions over the medium term,PERMANENT present and the near term hiring INDUSTRY are robust. Six-monthly CBD and WA but for the EMPLOYMENT EXPECTATIONS BY intentions West Perth employment forecasts by Deloitte Access Economics suggest continuing growth in total white collar employment. The industry sectors forecast likely to expand the most over the rest of 2012 include Rental, Hiring and Real Estate Services and Financial and Insurance Services. Of the larger sectoral employment bases, Professional, Scientific and Technical Services and Mining remain buoyant, however there may be a slight contraction in Public Administration and Safety Perth cbd & west perth white collar employment 6 Month Growth Historical & Forecast Total White collar (112,052) Rental, Hiring and Real Estate Services (3,217) Financial and Insurance Services (14,507) Agriculture and mining (11,867) Other Services (1,892) Electricity, Gas, Water and Waste Services (1,310) Administrative and Support Services (5,940) Manufacturing (1,463) Health Care and Social Assistance (9,733) Education and Training (2,064) Accommodation and Food Services (4,847) Professional, Scientific and Technical Services (24,505) Retail Trade (4,868) Wholesale Trade (1,556) Public Administration and Safety (18,253) Arts and Recreation Services (347) Construction (2,715) Transport, Postal and Warehousing (798) Information Media and Telecommunications (2,170) -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% Jun-12 Dec-12 Source: Deloitte Access Economics, Analysed by Colliers International Research Colliers International | p. 3
  • 4. research & forecast report | SECOND HALF 2012 | OFFICE | PERTH CBD Supply • The recent coinciding completion of • Colliers International expects a new supply Preferred Contractors Brookfield Place, Bankwest Place and 181 cycle is imminent as a result of recent high Adelaide Terrace, together with the net absorption, expected demand levels and completion of several smaller projects and a low vacancy rate. A number of major refurbishments in the first half of 2012, has buildings are proposed and likely to start resulted in an historically high supply construction in late 2012 or early 2013, with addition to the Perth CBD office market in the first of these buildings scheduled for Q3Registration Technologies Termsin& Conditions weak supply the first half of 2012 following levels 2011. 2014 delivery. • Severalnew projects, ranging in size • Totalstock additions, including between 3,500m2 and 30,000m2, are refurbishments and minor new completions currently actively seeking tenant pre- for the CBD, totaled 157,926m2 of space, the commits prior to commencement of large portion (77%) of which was from construction. However, 1008 Hay Street is Brookfield Place and Bankwest Place. In under construction and the owners of 253 these two buildings 100% of the space was St Georges Terrace are understood to be pre-committed with only a small amount of proceeding with this development on a sublease space remaining available, which speculative basis. The previously withdrawn was the key reason behind the historically May Holman Centre (14,895m2) is to be Brookfield Place high net absorption. refurbished and is also seeking pre- 125 St Georges Terrace, Perth • The current supply pipeline consists of commitment. The current pipeline consists Brookfield Place was recently completed and all mostly refurbished space, with a small new of a number of refurbishments that are 76,000m2 of space was pre-committed or leased on building under construction in the western under construction, all of which are expected completion, and BHP Billiton is the anchor tenant. to be delivered in the over the next six to 12 periphery of the CBD, totaling approximately 17,852m2. Other than this, there is no other months. A notable project, whilst not new supply under construction. As a result, technically in the CBD, is the Workzone Colliers International is projecting minimal development at 202 Pier Street. The new supply in the next two years. development will provide 27,000m2 of supply, of which 20,500m2 has already been leased. Surplus space of 6,500m2 is expected to become available from Q3 of 2013. PERTH CBD OFFICE SUPPLY 2011 2012 2013 2014 2015 Mooted Perth CBD Supply (m²) 13,394 162,236 8,584 57,338 105,719 207,286 Pre-committed Space (%) 76.7% 95.3% Let us11.3% you 0.0% Help 28.6% 0.0% Source: Colliers International Research PERTH CBD OFFICE SUPPLY 120,000 2011 2012 2013 2014 2015 100,000 Completed Under Proposed Mooted 160,268sq m Construction 169,691sq m 207,286sq m 17,852sq m Total Office NLA (m2) 80,000 60,000 40,000 20,000 0 Uncommitted New Committed New Uncommitted Refurbishment Committed Refurbishment Source: Colliers International Research Colliers International | p. 4
  • 5. research & forecast report | SECOND HALF 2012 | OFFICE | PERTH CBDPerth CBD Recently Completed/Under Construction PERTH CBD Recently Completed and Projects under Construction New Building Refurbishment Year of % Pre - Owner / Address Status Office NLA (m2) Office Area (m2) Completion committed Developer 108 St Georges Terrace - 5,834 Completed 2011 100% Stockland/Brookfield Equus 8,100 - Completed 2011 60% Birchwood Consolidated Pty Ltd 580 Hay Street Allendale Square GE Real Estate Investments Australia 4,300 Completed 2012 80% 77 St Georges Terrace Pty Ltd 507 Murray Street 2,700 - Completed 2012 84% Judd Projects Albert Facey House 9,343 Completed 2012 100% WA Government 469 Wellington Street 181 Adelaide Terrace 6,991 - Completed 2012 89% Finbar Bankwest Place 42,500 - Completed 2012 100% Saracen Properties 111 William Street Brookfield Place 74,500 - Completed 2012 100% Brookfield 125 St Georges Terrace Brookfield Place, Heritage Blds - 6,000 Completed 2012 100% Brookfield 125 St Georges Terrace Winston Holdings Pty Ltd & Ayoman 88 William Street - 5,758 U/C 2012 74% Pty Ltd 197 St Georges Terrace - 2,567 U/C 2012 67% GDI 5 Mill Street - Stage 1 - 4,229 U/C 2012 73% GDI Total - Recently Completed 160,268 Total - Under Construction 17,852Source: Colliers International Research PERTH CBD PROPOSED & MOOTED PROJECTS New Building Refurbishment Year of % Pre- Owner / Address Status Office Office Area (m2) Completion committed Developer NLA (m2)1 Mill Street 6,234 Proposed 2013 0% GDIPublic Trustee Building - 6,500 Proposed 2014 100% Mirvac55 Hay Street863 Hay Street 10,947 - Proposed 2014 0% The Perth Diocesan Trustees999 Hay Street 10,200 Proposed 2014 0% Qube950 Hay Street 11,219 - Proposed 2014 0% Oaksfield Pty LtdOld May Holman Centre - 14,895 Proposed 2014 0% Crownbase Capital Pty Ltd32 St Georges TceVeil 253 3,577 - Proposed 2014 0% Primewest253 St Georges TceKings Square Building 1 Wellington St 17,500 - Proposed 2015 0% Seven Group Holdings/Leighton(Former PEC Site)396 Murray Street 28,000 - Proposed 2015 0% Diploma/ SaracenOld Treasury 30,219 - Proposed 2015 100% Mirvac28 Barrack StBrookfield Place Stage 2 30,000 - Proposed 2015 0% Brookfield123 St Georges TerraceWaterfront (Potential Space) 70,000 - Mooted Mooted 0% N/APerth WaterfrontKings Square 62,500 - Mooted Mooted 0% Seven Group Holdings/LeightonWellington St (Former PEC Site)Former ABC Site 12,874 - Mooted Mooted 0% Finbar/Ventrade187-193 Adelaide TerraceTotal - Proposed (m²) 169,691Total - Mooted (m²) 207,286Source: Colliers International Research Colliers International | p. 5
  • 6. research & forecast report | SECOND HALF 2012 | OFFICE | PERTH CBD Vacancy Preferred Contractors CBD – Stock & Vacancy by PRECINCT & Grade PERTH PRECINCT/GRADE TOTAL MARKET CBD WEST CBD EAST CBD NORTH Stock Vacancy Stock Vacancy Stock Vacancy Stock Vacancy (m²) (%) (m²) (%) (m²) (%) (m²) (%) Total - All Grades 1,577,409 4.2% 1,014,502 3.8% 282,551 5.4% 280,356 4.8%Registration Technologies Terms & Conditions Premium 322,722 1.3% 279,722 0.9% 0 n/a 43,000 4.0% A Grade 600,381 4.0% 415,271 5.6% 99,040 0.7% 86,070 0.0% B Grade 437,237 5.9% 281,213 3.8% 108,347 9.4% 47,677 10.6% C Grade 208,147 6.1% 36,857 4.7% 75,164 5.8% 96,126 6.9% D Grade 8,922 1.0% 1,439 0.0% 0 n/a 7,483 1.2% Source: PCA July 2012/ Colliers International Research Central Park 152 St Georges Terrace, Perth BHP leased level 16 with an area of 1,500m2 in this building for five years at an estimated $800/m2. DELAYS AND STRONG DEMAND REDUCING AVAILABILITY • The vacancy rate remains tight in the Perth • A two-tiered market, as previously reported, CBD in the first half of 2012, but the square continues to be evident with the CBD West metreage of total office space has increased sector vacancy level notably lower than other by 9.2% to 1,577,409m2 in the six months to divisions of the CBD at 3.8%. Vacancy in the June 30. CBD East-precinct increased slightly from 4.7% • Total office space vacancy in the first half of in the previous period to 5.4% in June, but CBD 2012 eased to 4.2% (as at June 2012 - north tightened 2.1 percentage points despite a PCA). However, actual availability of space is 15% increase in stock. This was a result of lower than this. Bankwest Place being added into the mix as 100% occupied. • Premium Grade space vacancy increased from 0.1% to 1.3% in June 2012, but remains • There was a notable increase in A Grade critically low. vacant space of 2.6 percentage points to 4.0%. Let us Help you PERTH CBD TOTAL OFFICE MARKET VACANCY RATE PERTH CBD VACANCY BY GRADE 18% 36% Forecast 32% 16% 28% 14% Vacancy Rate (%) 24% 12% 17.6% Vacancy Rate % 20% 10% 16% 8% 12% 6.2% 6.3% 7.2% 6% 8% 4% 4% 4.2% 1.4% 0% 2% 0.1% Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 0% Premium A Grade B Grade C Grade Vacancy Rate 10 Year Historical Average Jul-11 Jan-12 Jul-12 Source: PCA/ Colliers International Research Source: PCA/ Colliers International Research Colliers International | p. 6
  • 7. research & forecast report | SECOND HALF 2012 | OFFICE | PERTH CBD Rents and Incentives Current Incentive Levels & Forecasts – Q2 2012 PERTH CBD AVERAGE INCENTIVE RANGE Grade Jun-11 Mar-12 Jun-12 6-month Forecast LOW HIGH LOW HIGH LOW HIGH Premium 5% 10% 0% 10% 0% 10% A Grade 5% 15% 0% 10% 0% 10% B Grade 10% 15% 0% 10% 0% 10% Source: Colliers International Research INCENTIVES MINIMAL AND OPTIONS REMAIN LIMITED • Since December 2011 incentives have • One of the drivers for incentives at present remained static, reflecting low stock levels appears to be the reluctance of banks to and low vacancies. While there has been free up capital. This means that prospective some easing in stock and vacancies over tenants have limited capacity to fund their the last six months, in relative terms this own fit-out, thus creating a barrier to the has not been big enough to drive major take-up of long-term tenancies. Incentives changes in incentives. The six month of 15% on a ten-year lease effectively allow forecast indicates no substantive change in tenants to fund fit-out costs. this area.251 St Georges Terrace, PerthCB & I and Momentum Engineering have taken rents still moving upwarda total of 2,370m2 space for 5 and 7 years • According to Deloitte Access Economics GFC, when global concerns led to a slowingrespectively at a rate of approximately $740/m2. CBD employment figures, Perth CBD white in demand and a temporary pull-back in collar employment is expected to grow by an business expansions. Premium net rents are additional 1.3% between June and December now averaging $843/m2, with A Grade net this year following a forecast 1.6% increase rents averaging $753/m2. in the first six months of 2012. This will • The squeeze on Premium and A Grade result in an additional 3,204 white collar space means that demand for B Grade workers in the CBD by year’s end. space is rising, and while it is unlikely that A • Thisrecovery in growth is expected to result and B Grade rents will converge, there is the in continued solid levels of absorption in the distinct possibility that average B Grade net second half of 2012 and 2013, which in rents will approach $700/m2 in early to combination with minimal stock additions mid-2013. Rents in B Grade space are in fact during the year will maintain upward tipped to rise more sharply than Premium pressure on rents for available stock. and A Grade rents, as the limited availability • Premium rents have recovered most of the of this space pushes tenants towards B ground lost in the aftermath of the 2008 Grade office space. PERTH CBD AVERAGE NET FACE RENTS $1,000 Forecast $900 $800 Premium Grade $700 Net Face Rent ($/m2) A Grade $600 B Grade $500 $400 $300 $200 $100 $0 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Premium A Grade B Grade Source: Colliers International Research Colliers International | p. 7
  • 8. research & forecast report | SECOND HALF 2012 | OFFICE | PERTH CBD Investment Market Activity Preferred Contractors POSITIVE START FOR TRANSACTIONS IN 2012 • Major transactions($10 million-plus) in the year $8,500/m2 and $9,750/m2 and B Grade to June 2012 exceeded $956 million, however between approximately $5,875/m2 and $7,250/ more than 85% of the total value of m2. transactions occurred in the six months to • The strong transaction level in 2011 came amid December 2011. Since then, transactions increasing interest in the Perth market fromRegistration Technologies Terms just Conditions in the six months totaling & over $140 million both foreign and local institutions, and the need to June this year have occurred. The volume of by some owners to reweight their exposure to transactions this year has come off from the the commercial office market. The State’s previous high base of 2011 with purchasers in continuing strong office rental market, this period dominated by institutional investors. underpinned by its resources sector, attracted • Major transactions this year have included a institutions seeking to gain exposure on 50% sale of 225 St George’s Terrace by the forecasts of continuing good investment Wyllie Group to Charter Hall for $96 million, returns. 255 & 267 St Georges Terrace for $27.6 • Despite a drop in interest rates, market capital million and 41 St George’s Terrace to Wakefield yields have remained static since the March Properties for $16.45 million. Interest however quarter for Premium assets, at between 7.5% remains strong, with over $250 million in deals and 8.5%. A Grade yields remained stable at currently in conditional due diligence. between 8.0% and 8.75% through 2011. 255 & 267 St Georges Terrace, Perth Stockland sold these two properties to Primewest • Capitalvalues remained stable, between for $27.6m, which represented a yield 10.34%. $9,450/m2 and $10,750/m2 for Premium grade assets. A Grade values have ranged between PERTH CBD AVERAGE YIELD RANGE Grade Jun-11 Mar-12 Jun-12 12 Month Yield Change LOW HIGH LOW HIGH LOW HIGH Premium 7.25%-8.25% 7.5%-8.5% 7.5%-8.5% +25 basis points A Grade 8.0%-8.5% 8.0%-8.5% 8.0%-8.5% 0 basis points B Grade 8.5%-9.5% 8.5%-9.0% 8.5%-9.0% 0 basis points Source: Colliers International Research Let us Help you PERTH CBD A-GRade YIELD RANGE 12% 11% 10% 9% Capital Value ($/m2) 8% 7% 6% 5% 4% 3% 2% Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Source: Colliers International Research Colliers International | p. 8
  • 9. research & forecast report | SECOND HALF 2012 | OFFICE | PERTH CBDINVESTMENT SALES MARKET ACTIVITY LEASING ACTIVITY Start Term Starting Rent Building Level Lease Type Lessee Date Area (m2) (Years) (Net $/m2) London House, 216 St Georges Terrace, Perth 12 Jul-12 586 4 $725 New Lease Chevron Australia Place, 15-17 William Street, Perth 8 Jul-12 1,228 5 $685 New Lease McDermott Australia BGC Centre, 28 The Esplanade, Perth Ground Oct-12 400 5 $608 New Lease Undisclosed QV1, 250 St Georges Terrace, Perth 33 & 34-36 Apr-12 6,234 10 $875 Renewal/ Extension Freehills Central Park, 152-158 St Georges Terrace, Perth 16 Jul-12 1,543 5 $800 New Lease BHP Billiton 251 St Georges Terrace, Perth 7 Jul-12 1,167 5 $740 New Lease CB & I 251 St Georges Terrace, Perth 8 Jul-12 1,204 7 $740 New Lease Monumentum Engineering Exchange Plaza, 2 The Esplanade, Perth Pt 21 Jul-12 373 5 $860 Renewal/ Extension Tokyo Gas QV1, 250 St Georges Terrace, Perth Pt 18 Aug-12 546 1 $920 Renewal/ Extension Vodafone Hutchinson 10 William Street, Perth 5, 6 & 7 May-12 1,177 5 $550 New Lease Zettaserve St Georges Square, 225 St Georges Terrace, 3 Apr-12 925 7 $685 New Lease Bendigo Bank PerthSource: Colliers International ResearchINVESTMENT SALES MARKET ACTIVITY SALES AND INVESTMENT ACTIVITY Net Sale Sale Capital Value Building Lettable Price Yield # Vendor Purchaser Date ($/m2) Area (m2) 255 & 267 St Georges Terrace, Perth Jun-12 4,075 $26,700,000 10.34% $13,104 Stockland Primewest St George’s Square, 255 St Georges Mar-12 21,221 $96,000,000 8.86% $9,048 Wylie Group Charter Hall Terrace, Perth (50%) 41 St Georges Terrace, Perth Jan-12 2,800 $16,450,000 n/a $5,875 Conisborough Pty Ltd Wakefield Properties Pty Ltd AMP Capital Wholesale Office Exchange Plaza, 2 The Esplanade, Perth (50%) Dec-11 34,396 $157,700,000 7.32% $9,170 Stockland Fund SAS Trustee QV1, 250 St Georges Terrace, Perth (50%) Sep-11 63,887 $310,000,000 7.05% $9,705 Eureka Capital Corporation (Dexus) 251 St Georges Terrace, Perth Aug-11 9,745 $61,300,000 10.72% $6,290 Private Investor Primewest Motor Accident Commission 226 Adelaide Terrace, Perth Jul-11 14,459 $103,500,000 8.44% $7,158 First State of South Australia Governor Stirling Tower, 197 St Georges Terrace Commonwealth Jul-11 39,721 $152,000,000 11.80% $3,827 GDI Perth Property Office Fund Bankwest Tower, 108 St Georges Terrace, Perth Jun-11 39,415 $130,000,000 8.35% $6,694 Stockland Brookfield (50%)Source: Colliers International Research** Estimated price# Yield quoted is initial yields Colliers International | p. 9
  • 10. research & forecast report | SECOND HALF 2012 | OFFICE | PERTH CBD Investment Analytics Perth Capital Returns Strongest Among National Capitals PERTH CBD A Grade Office returns 50 10 40 8 (Income - Rolling Annual %/pa) (Capital - Rolling Annual %pa) 30 6 20 4 10 2 0 0 -10 -2 -20 Mar-06 -4 Jun-06 Mar-07 Jun-07 Mar-08 Jun-08 Mar-09 Jun-09 Mar-10 Jun-10 Mar-11 Jun-11 Mar-12 Sep-06 Dec-06 Sep-07 Dec-07 Sep-08 Dec-08 Sep-09 Dec-09 Sep-10 Dec-10 Sep-11 Dec-11 Capital Return Income Return41 St Georges Terrace, Perth Source: IPD/Colliers International ResearchSold in January 2012 to Wakefield Propertiesfor $16.45m that resulted in a capital value of • Investment activity in 2012 has been dominated • ColliersInternational continues to field regular$5,875/m2. by institutional investors , albeit off a low base enquiries from investors across all categories of transactions. The high level of activity in 2011 interested in establishing or expanding their by institutional investors has carried through to presence in the robust WA commercial property 2012 as rents continued to increase and the market. office space demand outlook remains positive based on the resource sector investment spending pipeline. PERTH CBD INVESTMENT SALES BY BUYER TYPE 19% 25% 33% 40% 50% Private Institution Foreign 56% Corporate 20% 63% 67% 20% 50% 25% 20% 13% 2008 2009 2010 2011 2012 Source: Landgate/Colliers International Research Colliers International | p. 10
  • 11. research & forecast report | SECOND HALF 2012 | OFFICE | PERTH CBD Outlook 522 offices in Preferred Contractors The June 2012 Business Outlook by Deloitte Access Economics suggests that global uncertainty 62 countries on notwithstanding, the outlook for WA remains positive. This sanguine view of the State’s prospects 6 continents comes on the back of ongoing demand for resources, and most importantly a durable demand for energy, and the range of committed projects which are likely to provide WA with a buffer against United States: 125 Canada: 36 global uncertainty for at least the next two years. Latin America: 18 Asia Pacific: 194Registration cost Technologies with Terms & Conditions the becoming an In recent times, there have been some rumblings by the resource sector about and operating environment in WA, the implication that Australia is development EMEA: 117 increasingly expensive location for resource companies in which to operate. Whether or not these • $1.5 billion in annual revenue reservations by the resource sector translate into a negative impact on investment and hiring million square feet under • $978.6 intentions over the medium term is yet to be played out. management • Over 12,500 professionals Recent forecast revisions by the World Bank on global economic growth – down to 2.5% from 3.6% - may also dampen confidence levels. Western Australian economic conditions remain tightly linked to China’s, and with leadership changes scheduled for the latter part of 2012 there is strong impetus to maintain economic growth in the country. This is likely to underpin strong COLLIERS INTERNATIONAL export levels for Western Australian resources in 2012. Level 19, 140 St Georges Terrace WA’s investment pipeline looks likely to remain strong out to 2015; this is expected to keep PERTH, WA, 6000 unemployment low and demand for labour relatively strong in this period. As a result, Colliers tel 08 9261 6666 International Research is expecting demand levels for the rest of 2012 to remain buoyant. FAX 08 9261 6611 Whilst a two-speed economy is likely to remain in play, the Perth CBD office market has and will remain driven by resource sector conditions, and Colliers International is forecasting effective researcher rents to grow through the remainder of 2012 and 2013 as vacancies remain tight. Michael Knight The strong supply level in 2012 of approximately 157,926m2 has seen vacancy increase to 4.2% Manager- Research and Urban in July. This has largely been created by the availability of backfill space at 108 St Georges Tce Economics and 197 St Georges Tce, following the refurbishment. However, Colliers International believes this tel 08 9261 6675 FAX 08 9261 6688 is likely to be countered by demand levels, driving vacancy back to mid-three percent by July 2013. Colliers International’s research has identified a number of new buildings seeking pre-commitment, and a series of proposed developments that may produce supply options from 2014. Whilst decisions on pre-committing have so far been delayed by a number of tenants, we are expecting Let us Help you that by the end of 2012 at least two to three new CBD buildings will have sufficient pre-commitment to proceed. Strong short-term resource sector investment spending is flowing into mining-related service Colliers International does not give any warranty in businesses as major projects are granted approval and construction commences; and this will relation to the accuracy of the information contained in this report. If you intend to rely upon the information maintain pressure on office space demand in the CBD for the short to medium term. However, contained herein, you must take note that the should events occur to significantly affect the level of investment spending or commencement of information, figures and projections have been provided these major projects softer demand could result and potential for an increase in sublease space by various sources and have not been verified by us. We have no belief one way or the other in relation to the or assignment of leases. accuracy of such information, figures and projections. Colliers International will not be liable for any loss or 2011 was a major year for investment sales, and 2012 has so far seen yields remain stable. The damage resulting from any statement, figure, calculation or any other information that you rely upon that is strong State economy has brought about renewed foreign and institutional buyer interest. contained in the material. COPYRIGHT - Colliers However, global credit conditions and economic volatility could affect transactional activity and International 2012. buyer sentiment. On the whole, Colliers International Research is expecting the Perth CBD office market to remain resilient and net absorption to reduce due to low supply and the large amount of pent-up demand mostly satisfied through delvivery of Bankwest Place and Brookfield Place. The IMF has recently confirmed the Federal Government’s sentiment regarding the national economy, saying that it believes Australia is one of the best-positioned of the developed countries to weather further deterioration in the global economy. Accelerating success. Colliers International | p. 11 www.colliers.com.au/research