Perth Office Supply

Hi All,

With the number of cranes working in Perth at the moment, does anyone see a looming over-supply of office space in 2 years?

To my very untrained eye, we are building more office space in Perth right now than the sum of office supply since the 1970's.

This will be a good thing eventually....heaps of modern, energy efficient office space that will be put into the market, but I see some wild swings in rents and valuations in the short term (2-10 years).

It will change the look of our city drammatically as new replaces old.

We may well have demand for most of it, but I could not tell as I am not actively involved in this market.

Glenn
 
how many of those cranes are for resi apartments vs. office? with a lot of projects being canned (in fat most of them) I can see a big shortage looming. Same goes for resi tho.
 
Hi Ausprop,

Thanks for your reply.

I could not tell you the split between resi and commercial for the cranes in the city....by my opinion is that it is skewed on the side of commercial.

It is mainly the buildings under construction right now that I was alluding to...it would seem to me that number under construction is enourmous compared to what has been built over the last 30 years.

Yes, we have had a population explosion and that brings with increased commerce, but I have the feeling that many of these buildings will not even be fitted out immediately after construction....they will rest as concrete shells until there is enough demand, or they have been sold at huge losses to investors that can charge lower rents to achieve a satisfactory return on their investment.

Sydney on the other hand has 2 cranes working in the CBD as Grossreal alluded to in a post that I cannot find right now. While the Sydney commercial market has been kicked in the nuts due to the industrialisation of China (Sydney being Australia's capital of manufacturing) and the financial crisis resulting in the loss of many jobs in the financial sector, in the short term (5-10 years) I see this as a better city for commercial investment.

Glenn
 
I am developing in west perth, so take heart from articles such as...

http://www.thewest.com.au/default.aspx?MenuID=359&ContentID=111319

it is pretty hard to develop comm space there for under $9k/sqm, so sales under that will kill any new development.

not sure I share the optimism for Sydney - kicked in the guts from manufacturing, then finance and now resources and general falls in tax receipts as the economy deteriorates. Resi I could see... the city is a destination of choice, tho with unemployemnt levels set to soar there may be a question mark there too.

When I caught up with Aperry off this forum about 2 months ago (from Melbourne) he was shocked as to how few cranes were on the skyline.
 
Trrouble spots around Australia

Hi All,

With the number of cranes working in Perth at the moment, does anyone see a looming over-supply of office space in 2 years?

To my very untrained eye, we are building more office space in Perth right now than the sum of office supply since the 1970's.

Glenn

Hi Glenn:

Only came back this week, and saw your post from just before
Christmas.

Both Perth and Brisbane or spots to watch very carefully -- and
now Sydney with the global turmoil, given it is the financial
centre for Australia.

If you would like a bit more detail and an overview of how the
Cycles for the various Commercial sectors (Office, Retail and
Industrial) overlap ... you may care to look at a 'Warning Video'
I put together for my Clients last year.

Hope that's of help.

All the best ... Chris
 
Chris it would be interesting to see where the 25% or so increase for Perth is coming from? i.e. which projects. It is hard to envisage the Perth CBD expanding by anywhere this magnitude (would be exciting times tho!) and particularly so given the amount of cancelled projects. Bishops See stg 2 looks like it is a goer tho.

Obviously your presentation could do with some updating - talk of interest rate rises etc no longer valid, commodities down turn now upon us, GFC impact upon Sydney/Melb, Mitsubishi gone.
 
Perth Market

That Video was prepared back in Feb last year -- simply to alert
clients of a few problem areas.

From what I can see, most of the development was originally of
a speculative nature -- but now seems to have a solid level of
pre-commitment. However, with what has occurred since, some
of that may have fallen away -- unless it had been fully locked in.

To help you I've attached the most recent report I can find on
the Perth Office market. Hope that helps.

Regards ... Chris
 

Attachments

  • Perth~CBD-OfficeSpring2008.jpg
    Perth~CBD-OfficeSpring2008.jpg
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i just rented a 39sqm spot in NPerth for 20% under market - place was empty start of Dec - the whole block is now leased in just 4 weeks.

we had the pick of them all - now there's nothing along the whole street.
 
hi all
not sure about the ugg boots but you are going to need them to keep warm if you go into the commercial in cbd syd at the moment.
yes there is only two cranes working and not alot more ready to start.
the comm is and has come off at the moment and I can't understand why except the lenders for me
the leases are running at around 8% net returns so the money is in the lease.
the problem is the lenders as they are dropping the lvrs down to 65% in some cases
so its hard to get the lenders excited.
the ones that were lending have there funds frozen so not alot of joy there
will the perth market have over supply I have not got a clue as I don't have any floor plate prices
I asked dazzling at one stage to do my excel for perth and that prices flor plate for sale each 4 months
this gives me the growth numbers
not in sales but in sale ads as the real estate will but up the price if they see growth in value.
at the moment most including me are in hold and see with comm at the moment and if a chinese wants a comm then sell off one.
as the distressed resi is alot better value at the moment
I do think if you can get a lender to lend you a comm in cbd syd is still very good value and I am still looking at getting involved with groups that want to get into comm there but I think perth will come off just not for a while.
I am waiting until march to see what happens to a few smller lenders and then
what happens with the huge farming market thats up for sale and the distressed higher end resi market as alot of these lenders were into that end of the market a few have been falling off the tree and I think a few more will go
and they are or were very active in the perth market.
so interesting time to come.
may have to read thru a couple of times
 
A few punches being thrown on Perth Now

Nothing to show for WA boom

Liam Barlett

January 17, 2009 05:00pm
WEST Australians have every right to feel dudded. The so-called unrivalled boom has come and, according to the official figures, gone, and has left not much.

Take a drive through city streets and try to get a sense of what the ``once-in-a-lifetime'' economic picnic delivered.

There's the odd new chrome and glass monolith with the name of a mining company stapled to the side of it, but apart from that, where's the public benefit? Where's the social dividend associated with all the prosperity?

We've been rolling in excess funds for the past five years and, still, we have no new football stadium, no new indoor sporting venue and no new state museum. The Northbridge rail line is still above ground and the city foreshore remains sterile and undeveloped.

The East Perth power station site has been left to rot, the mothballed Entertainment Centre is a terrible eyesore and the much-vaunted urban renewal around the WACA Ground is half-baked.

Apologies at asking another rhetorical question, but how is all this non-achievement possible given the vast amount of wealth that has flowed through state coffers?

In 2004, with the boom kicking in, former treasurer Eric Ripper booked a surplus of $799 million. The following year it delivered $1.104 billion, then $2.59billion, $2.25 billion and last year $2.507billion.

...Cont

0,,6444458,00.jpg
 
There's the odd new chrome and glass monolith with the name of a mining company stapled to the side of it, but apart from that, where's the public benefit? Where's the social dividend associated with all the prosperity?

"Odd new".....is Liam serious ?? There is a plethora of cranes over the city skyline working flat-out to keep up with pent up demand. We had (and still do) the lowest vacancy rate of office space in the world.

"Public benefit" and "social dividend".....yes yes, I know what they are, the things that are doled out for free to the latte set down in Fremantle. The chattering lefties denegrating everything and everyone.

Perth go-getters have done marvellously well out of the boom. There is a massive amount of people who have set themsleves up personally for life out of the boom. You won't hear any of them whinging.

Chrome and glass monoliths - I love 'em. What does he mean - "but apart from that". I tell ya Redwing, get yourself a slice of that monolith like so many people have.....and there doesn't need to be any 'apart'....it's more than enough. ;)
 
Hi Ausprop,

Thanks for your reply.

I could not tell you the split between resi and commercial for the cranes in the city....by my opinion is that it is skewed on the side of commercial.

It is mainly the buildings under construction right now that I was alluding to...it would seem to me that number under construction is enourmous compared to what has been built over the last 30 years.

Yes, we have had a population explosion and that brings with increased commerce, but I have the feeling that many of these buildings will not even be fitted out immediately after construction....they will rest as concrete shells until there is enough demand, or they have been sold at huge losses to investors that can charge lower rents to achieve a satisfactory return on their investment.

Sydney on the other hand has 2 cranes working in the CBD as Grossreal alluded to in a post that I cannot find right now. While the Sydney commercial market has been kicked in the nuts due to the industrialisation of China (Sydney being Australia's capital of manufacturing) and the financial crisis resulting in the loss of many jobs in the financial sector, in the short term (5-10 years) I see this as a better city for commercial investment.

Glenn

Hi, Glenn,

I can sense your feeling. Yesterday's thewest in the property section, there was an articule "buying dynamic changes". I quote "in totla nearly 120000m2 of new office space is under construction ... due to completion over next 18 mths" ....

Looking current economic crisis, the office market will be hit very hard soon. You do not expect on one side business are sacking staff, on another site, they are leasing more space.

Get out ASAP
 
I am developing in west perth, so take heart from articles such as...

Ausprop,

I believe office space is being oversupplied. Read yesterday's paper. Office space has been in demand for years. Now the residential is down the hill. Commercial area is next and will be hit very hard in the next 3-5 years. We will see empty offices and lower rent....
 
Get out ASAP

Indeed - if it's in the West newspaper, it must be true....those 22 y.o. journalists they have writing those commercial real estate articles are fully switched on and really have their finger on the pulse of what's going on.

Their experience in owning assets in that sector is simply overwhelming.

If they say get out, well, that's good enough for me.
 
Indeed - if it's in the West newspaper, it must be true....those 22 y.o. journalists they have writing those commercial real estate articles are fully switched on and really have their finger on the pulse of what's going on.

Their experience in owning assets in that sector is simply overwhelming.

If they say get out, well, that's good enough for me.

I do not really know what you are talking about. I simply quote a fact of 12000m2 and some other major supplies under way. 2 years ago, when people said get out of the residential market asap. People laught and now what happens? I just say my view on the market. You may not like it.
 
I believe office space is being oversupplied. Read yesterday's paper.

Tell me you are basing your belief on more than reading yesterday's newspaper. It's wrapping fish and chips today.


Now the residential is down the hill. Commercial area is next and will be hit very hard in the next 3-5 years. We will see empty offices

Now you are showing your total lack of knowledge in the area. How much analysis does TheAnalyst actually do ??
 
Tell me you are basing your belief on more than reading yesterday's newspaper. It's wrapping fish and chips today.




Now you are showing your total lack of knowledge in the area. How much analysis does TheAnalyst actually do ??

I do not have to tell you. As far how you see the market, it is your business. All right?

I just say the Perth office space is substantial oversupplied and will go down the hill and much worse than residential. Because, for residential, you can find tenants, for office space, you can find tenants, because small business are closing, because, big companies are sacking staff, because we are heading to recession, because, over a month, 6000 people lost jobs, because more sackings are udner way....

You do not even understand what 120, 000m2 means to the market. Perth is only about 2m people. I forgot to quote " in addition, there is about 37000m2 of office sapce with approval... the town of Victoria Park has a master paln for the development of about 87 000m2 of office space in the Causeway precint....."

Go figure out yoursel. If you can not interpret such simple fact, I have no words for you.
 
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