I have previously referred to the ASX/S&P 300 Metals & Mining Index (ASX:XMM) as a precursor to the strength or otherwise of the Perth Commercial office market.

As a leading indicator, the XMM leads the Property Council of Australia Vacancy Rate by up to 18 months, evidenced by the downturn in the index in early 2011, followed by a peak in Perth commercial office market rents in August 2012, followed by a significant retraction.

The upturn, indicated by the return to growth in early 2016 (and referenced by my earlier post) signalled a return to rental growth and turnaround in vacancy in mid 2018.

Geopolitical issues such as the simmering trade tensions between the US and China will have a dampening effect on key components of this Index, however the overall downward impact will be limited by the arbitrage in AUD/USD and flight to precious metals such as Gold.

Chinese stockpiles of Iron Ore are steadily diminishing which in likely to underpin Iron Ore export prices.

Short answer. The Perth CBD Office market should maintain its current trajectory for at least 24 months. For tenants, this means the decision to source and lock in lease commitments in the short-term is prudent, however limitation of the lease term to three to five years is equally prudent to enable the ability to capture any downturn.