The plight of Perth’s patchy office market has received a timely ray of hope with a building at 10 William Street becoming the first office asset to be exchanged and settled in the WA capital this year.

The six-storey William Street building, which sits on a 1,560sq m site, was acquired by Stanley College from private owners for $21m following an Expressions of Interest campaign run by Greg McAlpine, Tony Delich and Zach Schreier of Knight Frank.

While the building attracted both investor and owner occupier interest, what convinced the latter to buy, adds Knight Frank was the building’s 9B classroom certification, which presented an opportunity for the educator.

Given that it’s the only office asset to successfully change hands in the CBD this year, Delich said the sale of 10 William Street can’t be overstated.

“10 William Street provided a compelling offering for potential buyers, primarily due to the advantageous building location, the size of the landholding and the exceptional value-add potential,” said Delich.

“The property is situated in the core of Perth’s business district and in close proximity to the new CBD centre of Elizabeth Quay which is undergoing a massive construction phase at present.”

Development upside

The property, which has 4,248sq of net lettable area and secure open parking at the rear for up to 30 cars, was sold with 75.5% occupancy.

What’s driving the positive absorption in the Perth CBD is the sustained strength of economic and employment growth in the city, with the participation rate increasing to 69.3%.

Stanley College President Alberto Tassone regards the acquisition of 10 William Street as a great opportunity to secure a long-term home in the Perth CBD, as well as a strong investment asset for the future of the college.

In addition to its current net income of $1,356,524 annually, Tassone notes the site’s significant future development potential – with substantial growth prospects for buyers.

By bringing students from around the world to the Perth CBD, the college expects the 10 William Street asset to herald a new era of vibrancy for the city – not only to study, but to live, work, play and contribute to the economy.

“We took a long-term view with this acquisition which allows Stanley College to continue delivering training and education to international and local students,” he said.

Flight to quality

Knight Frank Head of Office Leasing WA Rick McKenzie notes tenant demand in Perth’s CBD office market was the strongest for premium assets in line with the national flight to quality.

“While the premium vacancy rate will increase as a consequence of backfill and further completions, demand here remains the strongest of all grades,” he said.

Given the limited development pipeline and increased number of project requirements in Perth, Knight Frank’s Perth CBD Office Market Report projects increased ongoing short-term demand for existing A- grade space.

The completion of Capital Square Tower 3 (13,681sq m) and the 9,529sq m at Westralia Square 2 marks the end the 2023 pipeline. While there are no completions due in 2024, an additional 32,000sq m at 9 The Esplanade is due for completion in H1 2025.

Meanwhile, site works have commenced at Lot 4 The Esplanade and are expected to deliver 60,000sq m in 2027.

Based on Knight Frank’s projections, Perth’s CBD overall vacancy rate will move from 15.9% to around 10% by 2027 due to dwindling supply.

Image: 10 William Street, Perth CBD.