The ending of the once-in-a-century mining investment and commodity price booms have clearly hit home in West Perth – home to the nation’s mining headquarters – with office rents falling dramatically and vacancy rates skyrocketing. From The Australian:
Nobody can recall seeing so many “For Lease” signs in West Perth, which houses the small and mid-cap mining companies, engineering firms, geologists and other service industries that fuelled a once-in-a-lifetime boom over the past decade. Another key indicator of the downturn is the sudden availability of street parking, which was almost impossible to find during the peak years of the boom between 2006 and 2012.
West Perth’s office vacancy rate soared from 5.2 per cent to a record 12.6 per cent in the past 12 months as companies were forced to cut costs by offloading space…
The Property Council of Australia says there is more office space on the market in West Perth than at any time since the late 1990s.
Jones Lang La Salle’s agent for West Perth, Mitchell White, says rents on lower-grade properties have plunged by as much as 20 per cent in the past year…
The West Australian Chamber of Commerce and Industry’s chief economist, John Nicolaou, says the shake-out is symptomatic of an economy that is changing rapidly – from undergoing a mining investment boom to a looming production boom…
A quick glance at the ABS’ capital expenditure (capex) data shows that Western Australian capex remains highly elevated, which portends further softness in the Perth commercial property market and economy going forward:
And it’s not just commercial property that is feeling the pinch. Residential vacancies have also risen sharply over the past year in concert with the slowing economy (see next chart).
Western Australia was the prime beneficiary of the once-in-a-century mining boom, which saw business investment drive one-third of all spending in the economy in 2012. Unfortunately for Western Australia, this also means that it will likely bear the brunt of adjustment as the mining boom unwinds in the years ahead.
