Office market in Perth, Brisbane to slump, bank says

Office vacancies will more than double and rents will slump in Perth and Brisbane as mining investment slows and firms cut costs, Morgan Stanley says.

Vacancies in Perth's central business district will surge to 17.5 per cent in the next three years from 6.5 per cent now, and in Brisbane will soar by about 10 percentage points to 23 per cent, analysts led by Lou Pirenc wrote in a note this week.

Rents could drop by as much as 9.3 per cent in Perth and 6.4 per cent in Brisbane by next year, the bank forecasts.

Falling commodity prices and rising costs have led to major resource producers deferring or cancelling projects.

The Australian government forecasts slower growth this month when it released federal spending plans for the fiscal year starting July 1 as the country's record mining investment boom peaks and economic growth in China, its largest trading partner, slows.

"As mining investment has been a robust source of white-collar employment growth in the past decade, we believe the associated unwind in investment in the coming years will adversely impact CBD office demand," Pirenc wrote.