An international property adviser is spruiking Perth's office sector as an investment hotspot among its Asian clients, as a separate survey ranks the city's offices as some of the world's most expensive.
DTZ Australia is advising its Asian clients that Perth's office sector has the best short-term investment potential in the Australian office market over the next two years because of its tight commercial vacancy rates, flat construction rates, buoyant growth expectations and booming economy.
A separate Knight Frank survey of the world's most expensive office markets released yesterday ranked Perth in the top 10 for the first time, putting it 10th with an $895 cost per square metre a year.
This puts Perth just behind Singapore ($907/sqm a year) and ahead of London City (ranked 11th with $880/sqm a year and Sydney (ranked 13th at $855/sqm a year).
The most expensive market was Hong Kong, $1553/sqm a year and then London West End at $1479/sqm a year.
The survey said Perth was a "rapidly emerging office market" and attributed the strong rental growth to the booming resource sector and the falling availability of prime space.
DTZ Australia's head of research Dominic Brown said Perth's office rental returns were about 11 per cent last year, and this was expected to jump to 18.5 per cent to potentially about 20 per cent this year.
The second-strongest market, Sydney, last year got 7 per cent rental returns in the office sector, and this was projected to rise to 16 per cent this year.
Dr Brown said the group was seeking to educate Asian investors to look beyond the established markets of Melbourne and Sydney.
Sydney-based Dr Brown said there was a lot of upside because WA currently attracted about $200 million from Asian investors every year, accounting for only 10 per cent of the region's total investment in Australian commercial real estate.
"Melbourne and Sydney are still king," Dr Brown said. "They are the core markets, and a lot of clients tell us they only want Melbourne and Sydney.
"We are in the process of educating our clients about other markets like Perth."
Local property adviser Gavin Hegney said foreign investors were attracted to the market because of the strong currency and economy.
Mr Hegney, chairman of the Hegney Property Group, warned that investors needed to be wary of WA's two-speed economy.
He said the resource industry was doing well, but it had created a "Dutch disease" whereby the sector's boom had dragged up operating costs for every other industry, squeezing both margins and investment confidence.
"Foreign investors looking to invest in WA need to beware of whether they are investing in a mining related piece of real estate, or a non-mining piece of real estate," Mr Hegney said. "They are two very different types of real estate." NEARLY FULL 96.7 The percentage of total occupied office space in the Perth CBD Source: Knight Frank