OIL and gas giant Chevron has appointed Brookfield to construct its 29-storey, 52,000 sqm tower at Perth’s Elizabeth Quay, confirming it will move ahead with plans to build a new Australian headquarters.
However, Chevron’s decision to move out of 32,000 sqm in the 40-storey QV1 tower at 250 St Georges Terrace upon its lease expiry at the end of 2023 has been considered a threat to the health of Perth’s office market.
Perth’s CBD office market has struggled since the down of the mining boom has seen total vacancies at 19.8% as of January, according to the Property Council of Australia, while with prime-grade vacancies at 14.2% and secondary-grade vacancies having blown out to 28.8%.
According to JLL data for the March quarter, Perth’s CBD recorded net absorption of 7,800 sqm in the quarter and 34,400 sqm over the 12 months to March, while vacancy had gradually tightened since its peak in 1Q16 of 24.7% to 21.4% in 1Q18.
BIS Oxford Economics released a report earlier this year warning that the proposed tower – which it had listed as “at least 40,000 sqm”– would keep the city’s vacancy rate above 20% for another 10 years.
BIS Oxford Economics senior project manager, Lee Walker, said weakness Perth’s office demand had further to run, and the market is already substantially oversupplied.
“Chevron may want its new office building at Elizabeth Quay to proceed, but the market won’t,” Walker said.
The move has had an air of uncertainty for some time. Late last year, Chevron secured another development extension from the Metropolitan Redevelopment Authority for the 6,795 sqm site just weeks before its two-year extension to lodge development plans expired.
It paid $64 million for the site, on the corner of Barrack Street and The Esplanade, in 2013 and requested the lodgement period in October 2015.
A Knight Frank earlier this year said that should Chevron commit to any newly constructed space, “future vacancy in QV1 will eventually be to the detriment of the lower grade buildings as tenants relocate”.
Iron ore miner Fortescue put out a requirement for some 12,000 sqm of A-grade office space last year, while law firm Clayton Utz, which currently resides in QV1with Chevron, is seeking new digs of 3,000 sqm.
Chevron Australia’s managing director Nigel Hearne said the group would make an investment decision next year.
Canadian giant Brookfield will likely to be the owner and developer of the asset, while its subsidiary Multiplex will be the project’s builder, and Chevron the tenant.
Chevron’s announcement coincided with its revelation that it will slash 400 jobs from its operations in the state over the next year, as its Pilbara LNG projects moves to full production.
Australian Property Journal
