Policy solutions needed to counter CBD dark zones
The high vacancy rate for older commercial buildings in Perth is a concern for the broader community and the Property Council of Australia is calling on the major parties contesting the state election to take a bigger interest in policy solutions to the problem.
The Perth CBD has the highest vacancy rate in the country at 22.5% and much of the vacancy is in older buildings known as ‘B grade’ stock, which makes up almost a third of the total stock of commercial offices in the CBD. The vacancy rate for B grade buildings is over 30%.
“The risk in Perth is that commercial tenants will continue to gravitate to the newer higher grade office towers leaving the older buildings vacant, creating ‘dark zones’ in the CBD”, Property Council WA Executive Director Lino Iacomella said.
“A two-tier office market is emerging in the CBD. There is stronger demand by tenants for prime and A-grade buildings, leaving many older buildings vacant. Vacancies in older building may not have peaked, and could see vacancy rates go even higher.
“In a bid to tackle, the rising Perth vacancy rates, the Property Council is calling on the major parties contesting the State election in March to commit to working alongside industry and the City of Perth to enable building upgrade finance agreements in the CBD.
“Building upgrade finance is a voluntary mechanism to assist building owners to upgrade commercial buildings to improve, water, energy, and environmental efficiency by retrofitting existing commercial buildings.
“Under this mechanism, a local council, building owner and a financier enter into an agreement where the building owner undertakes to upgrade their building; the financier agrees to fund the works, and the council agrees to levy a building upgrade charge against the land on which the building is situated to repay the loan.
“The initiative has been successfully adopted in Victoria, NSW and SA. However, it will require a change of the Local Government Act to enable building upgrade agreements to commence in WA.
“Building Upgrade Agreements are a simple and effective mechanism to overcome the high office vacancy rate in the CBD and prevent the spread of dark zones”.