Perth’s industrial real estate market is seeing lowering vacancies and appreciating face rents across all precincts and size ranges as it continues to be the most sought after commercial asset class in Australia.
For WA, the relative affordability of stock compared to the east coast has seen a number of new investors emerge resulting in a historically high volume of stock transact. Local, interstate and offshore buying groups have circled on the Perth market putting pressure on already tight yields during a time where cash rich buyers are plentiful and funding is available.
Ray White Commercial head of research Vanessa Rader said The Ray White Commercial (WA) vacancy count continued to show strong results for the Perth industrial market.
“Across all size ranges in metropolitan Perth we have recorded a total of 690,854sqm of unoccupied stock currently available across the industrial market,” Ms Rader said.
“This result is in line with robust results achieved in our last count in March and well down on our survey findings last October where 1,100,000sqm of vacant stock was recorded.
“The strong level of take up which has been recorded over the last 12 months has been due to both new and existing businesses relocating and growing.
“The high level of enquiry is likely to continue to see vacancies reducing over the short term.”
Ms Rader said vacant listings numbers were also down.
“We’ve seen a reduction in vacant listing numbers again this period, down 29.87 per cent compared to March 2021, with a remarkable 57.42% fall over the last year to just 479 listings,” she said.
“Improvement has been felt across all precincts and size ranges, notably the smaller end of the market which has seen suburbs such as Malaga, Osborne Park and Canning Vale improve dramatically given their historic high volumes of smaller industrial unit stock available in these precincts.”
Ray White Commercial (WA) joint managing director Chris Matthews said the industrial market in Western Australia had been very active.
“Mining has had a big lift and represents approximately 40 per cent of our Gross State Product. There has been good onflow of this activity into the industrial sector,” Mr Matthews said.
“Outside of mining there has been a noticeable difference in transport and logistics largely created by online shopping as well as manufacturing which is largely due to government funding and stimulus.
“Leased investments are by far the most sought after given money is cheap and investors want to put their equity into bricks and mortar.
“The owner occupier space is also very active given the current favourable lending conditions making it cheaper to own and occupy your own building as opposed to renting it.”
Mr Matthews said vacancy rates across the whole metropolitan area had been tightening.
“There has been a big absorption of stock and the core areas such as Welshpool, Kewdale, Belmont and Perth Airport have minimal vacancy,” he said.
“This has lifted rents and underlying land values.”
Over the last 12 months the Perth industrial market has seen take up of over 420,000sqm, dramatically reducing vacancies across all precincts and size ranges.
In turn, Ms Rader said pressure had built on the rental market after a prolonged period of stability, with rents now increasing at record rates as enquiry levels remain elevated.
“New supply continues to come into the market, however, given the elevated construction costs, we are seeing owners demanding higher rentals to cover these growing building costs,” she said.
“Many purpose built facilities are dictating rents in excess of $120/sqm which has driven up the average prime rents across the broader market.”
The East and North precincts have both enjoyed more than 20 per cent growth in rents over the last 12 months.
“The East has overtaken the North as the most expensive region, currently with net face rents averaging $110/sqm,” Ms Rader said.
“The North at $108/sqm while the South has grown 14.46 per cent in the last year to $95/sqm.”
Sales turnover for the Perth industrial market has reached an all time high in 2021.
“With volume of sales at rates unseen for many years we have recorded over $1.2 billion in industrial sales volume in the first three quarters of 2021,” Ms Rader said.
“The recent settlement of the Jandakot Airport deal for $1.3 billion will take 2021 sales to a historic high for the Perth metropolitan industrial market.
“Most outstanding however has been the high volumes of smaller deals.
“Buyers looking to diversify their investment portfolio have looked to commercial property resulting in new buyer groups entering the market.”
More than 82 per cent of all industrial deals conducted in 2021 were in the sub $1.5 million range.
“This highlights the appetite for these buyers, many cash rich, capitalising on low interest rates or the various funding channels now available,” Ms Rader said.
“In the $10 million+ price range we see many local buyers, syndicates, developers and institutions competing for quality assets including logistics/distribution, warehousing, and cold storage.
“The influx of private buyers both experienced and first timers continue to be drawn to the ‘COVID-19 safe state’ buoyed by the strong local economy, weight of funds available, and attractive yields which are on offer.”
Prime industrial yields are currently in the 5.00 per cent to 7.00 per cent range with many assets still achieving rates above or below this level.
“This offers great value when considering the current cost of money and yields achieved in other major cities,” Ms Rader said.