The downward slide continues for Perth's office market, with second-quarter data from JLL completing the 2013-14 picture and showing the city recorded the nation's highest level of negative net absorption at minus 82,900sqm.
With more space vacated than leased for eight successive quarters, including minus 13,800sqm in the second quarter, JLL said the office vacancy rate in Perth's CBD had climbed to 12.7 per cent and it expects the vacancy to peak at 16.4 per cent next year.
"A huge amount of sublease space has hit the market and any demand that is out there is not registering because the vacancy is growing faster than demand," JLL's director of office leasing in WA Nick Van Helden said.
"There are quite a few deals in progress but until the mining sector cranks up, no one is expecting anything to dramatically change." Mr Van Helden said the market was cautious ahead of the new supply of office space due to come online next year, which would drive vacancies higher than the city's 30-year average vacancy rate of 11.4 per cent.
"We are seeing more activity because tenants are taking advantage of the conditions and making decisions to move and reset their rents and improve their accommodation but unfortunately our vacancy continues to climb."
In the second quarter, JLL said Sydney's CBD recorded net absorption of 21,800sqm and a lower vacancy of 9.9 per cent while Melbourne had net absorption of 11,100sqm and an 11.1 per cent vacancy rate.
Brisbane's CBD office market was most in step with Perth, recording net absorption of 21,200sqm in the second quarter for a total deficit of 57,000sqm for the year and a vacancy rate of 16.5 per cent.
Although conditions were tough for leasing agents, Neil Kidd, director for office leasing at Colliers International, said not a lot of Perth building owners were in serious pain.
"The tough point will come in the middle of 2015 and into 2016 when constructed space comes into the market and at the same time we expect to see 108 St Georges Terrace coming back into the market with a lot of refurbished product," he said.
"Vacant owner-held space is climbing in quantum and if you are an owner and still holding space in the middle of 2015 you will want to have let that space by then.
"What's happening now is that incentives are climbing and rents are not falling markedly but come the middle of 2015 when all of the new space hits the market, one would image something has to give.
"There's only so far that you can go with incentives before you start looking at the actual face rent."
JP Morgan has a bleaker assessment of Perth's office market.
It estimates incentives have increased to 27 per cent and prime net effective rents have declined 25 per cent.
In the next two years it is forecasting Perth's vacancy to be close to 20 per cent and a further decline in net effective rents of 20 per cent, bringing the total correction in effective rents to 40 per cent since 2013.
It says asset values are likely to be written down to reflect lower sustainable market rents and longer letting-up times.