JLL’s analysis of office leasing market data shows an increase in office leasing activity during 1Q22, while future office demand expectations remain firmly on the up.
The data showed positive net absorption of 14,200 sqm was recorded across all CBD office markets in Australia in 1Q22. The Perth CBD recorded positive net absorption of 9,300 sqm in 1Q22 – the strongest quarterly net absorption result since 4Q18.
JLL’s Director – Research, Ronak Bhimjiani said, “There are no signs of stopping WA’s economic growth momentum with major indicators pointing upwards for some time now. The value proposition of WA has been boosted significantly since the on-set of the COVID-19 pandemic, with the mining sector playing a key role in driving economic growth.
“JLL Research’s analysis of company accounts shows that the major iron producers cost of production is in the region of USD 31-48/Tn, a level that is significantly lower than the current iron ore spot price of USD 134/Tn.
“The mining sector’s share of WA’s economic output has grown from 35% in 2015 to 42% in 2021, while the sector is also the largest occupier of Perth CBD office space. With company revenues and earnings on the up given the large spread between the cost of production and current spot price, it is no surprise to see this translate into buoyant CBD office market conditions,” said Mr. Bhimjiani.
Figure 1: WA economic output by sector
Source: JLL Research/ABS
Formal Tenant Representation briefs; an indication into future office space demand, are also up significantly. As at 31 March 2022, tenant briefs in Western Australia were 17% higher versus the same time last year.
JLL’s Head of Office Leasing – WA, Nick Van Helden said, “The overall increase in activity is an encouraging sign and there is further demand-led upside to be expected.”
“The Top three industry sectors that contributed towards overall net absorption included the professional services, mining and IT sectors. Furthermore, we are seeing additional enquiries from mining sector tenants looking to expand operations, while the financial sector is also active in the current market,” said Mr Van Helden.
JLL’s Managing Director – WA, Angelo Amara said, “The analysis of deal activity within our own business in 1Q22, showed that Perth CBD recorded 14% of national deal activity, while WA’s economic output represents approximately 10% of national economic output.
It is pleasing to see deal activity trend above WA’s share of national economic output. This shows the momentum that is occurring in the Perth CBD office market, despite the WA border having remained closed for the large part of 1Q22. With the WA border now having re-opened, we are expecting to see further upside in office leasing demand.”