A performing economy, working COVID-19 management plan and an improving Perth office market has firmly placed the city on the investment map as a destination for domestic and foreign capital.
A new CBRE report outlines Perth as being one of Australia’s most attractive prroperty markets to invest in over the past 18 months, underpinned by the stability of the WA economy and an improving leasing market in the wake of COVID-19.
According to the report, $5.1 billion in capital has been actively vying for approximately $740 million worth of office assets in Perth since June 2020.
CBRE’s WA head of capital markets Aaron Desange said despite elongated transaction processes and Australia-wide lockdowns suppressing and delaying activity, appetite for Perth investment opportunities had continued to rebound to relatively buoyant levels.
“Given the current economic fundamentals at play, investors have taken notice of the Perth market and future long-term growth potential, proven by the level of engagement in recent sales campaigns,” he explained.
“While capital is out there, it is still selective in nature, with income certainty of the highest importance given investment predictability and more favourable funding terms.”
With minimal lockdowns and mobility being the cornerstone of economic activity, WA has been able to sharply rebound from the initial outbreak, adding 122,250 jobs to the state economy since May 2020, CBRE data shows.
This has flowed through to the office market and – across 45 leasing deals (500+ sqm) this year, Perth has seen approximately 59,350 sqm in gross volume, almost double the amount seen in 2020 (31,500 sqm) – paving the way for positive net absorption figures.
CBRE associate, capital markets Nicholas Volk noted that an improving leasing market was attracting investors to Perth.
“Favourable physical office occupancy levels have allowed business’ real estate strategies to be formulated more effectively which has translated into new enquiry and new leasing deals,” Mr Volk said.
“Investors have placed value on assets which have proven successful in attracting tenants and in generating leasing momentum given they are able to underwrite their acquisitions with conviction and confidently deploy capital.”
As of June 2021, Perth prime office market yields were 6.27 per cent, compared to 4.59 per cent and 4.74 per cent for Sydney and Melbourne, respectively.
Mr Volk said there remained a healthy yield premium for groups willing to invest in similar assets in different geographies, with a current spread of 168 basis points between Perth and Sydney compared to the 30-year average of 99 basis points.
“Given an attractive yield premium for prime Perth office assets and $4.3 billion in unsatisfied capital, we expect demand for the right opportunities to continue rising,” he said.