The latest results from the Property Council/IPD Australian All Property Index (produced by MSCI) show that capital growth in Perth’s CBD office market has returned to positive territory for the first time in four years.
You can view other interactive office stats in our Data Room.
Over the last two decades, Perth’s office markets have been on a rollercoaster of a ride. Prior to the financial crisis, annual total returns peaked at over 46% in 2007 before sinking down to -6.3% in mid-2009. The mining boom and strong economic growth in Western Australia aided in the recovery with total returns reaching 14.5% at the end of 2012 but the end of the boom and a slowdown in Western Australia’s economic activity contributed to a decline in Perth’s office market performance. Annual capital growth turned negative in mid-2014 with the lowest point being reached two years later. Now, after 16 consecutive quarters of contraction, the market has once again experienced positive capital growth.
Dexus’s General Manager Research, Peter Studley, believes the capital gain is due to investors and valuers taking a more positive view of the stability of rents, level of incentives and downtime.
“Perth has always been a cyclical market and long-term investors know there will be swings and roundabouts from year to year,” said Mr Studley.
Dexus has exposure to the Perth office market, owning and managing prime assets including 240 St Georges Terrace and three towers in the Kings Square precinct.
“The Perth market is stabilising and we expect it to steadily recover from a low base. We anticipate further capital gains over the next few years driven by an improvement in the economy and positive trends in office fundamentals,” Mr Studley noted.