Perth industrial market turning the corner

WHILE sentiment has been improving over the last year, confidence is now being displayed by way of transactions and vacancy reduction in Perth’s industrial market, according to Ray White Commercial’s latest Between the Lines* research.

“The Perth economy has been threatening a recovery over the past few years,” said Ray White Head of Research Vanessa Rader.

“While Gross State Product levels have improved, aided by the uptick in commodity prices and growth in exports, employment growth has been improving at a limited rate.

“Low interest rates have done much to stimulate small business, but greater population growth is needed to further enhance the vibrancy of the Perth economy.

“Encouragingly has been the improvement in take-up in industrial space, which has been growing over the past three years.

“This highlights the increased demand for stock by small businesses which has not gone unnoticed by investors.”

Ray White Commercial (WA) Director Chris Matthews said over the last 12 months, Ray White Commercial’s vacancy survey of the sub 5,000sq m industrial market across Perth had resulted in a take-up of over 430,000sq m; being the third year of positive net absorption.

“This improved confidence has translated into a total of 904,973sq m of vacant stock which is actively being marketed (down from 947,991sq m),” Mr Matthews said.

“The North precinct has enjoyed the greatest take-up over this period and now accounts for 38.89 per cent of stock compared to 41.98 cent 12 months ago.

“This market has a high volume of smaller stock available resulting in the average vacancy of just 647sq m.

“The East now accounts for 335,575sq m (37.08 per cent), with the bulk of absorption over this last year being in suburbs such as Canning Vale, Welshpool and Belmont reducing their vacancy levels.

“While the South continues to maintain the smallest vacancy with 216,811sq m or just shy of a quarter of all stock, this market has a greater mix of vacancies across all sizes, while the affordable nature of this location has also aided in keeping this occupancy level up.

“There are 1,122 industrial properties currently listed for lease across the Perth metropolitan area, this is down 9.95 per cent over the last year (or 19.40 per cent over a two-year period).

“The standout performer being the smaller size range 0-500sq m, which now represents 43.48 per cent of total listings, down from 53.88 per cent two years ago.”

Mr Matthews said for the second consecutive year they had seen the greatest improvement in vacancies across the Eastern precincts.

“Canning Vale, Welshpool, Belmont and Kewdale have all reduced their number of vacancies, notably in the smaller size range for growing local businesses as well as tenants looking to upgrade into quality accommodation during this ‘tenant market’,” he said.

“Belmont has dropped off the top three list this period with Kewdale representing slightly higher vacancies.

“Despite a strong improvement over the last year, the North continues to have high numbers of sub 500sq m assets with Malaga holding the highest vacancy rate with 120 known vacancies (down from 138) totaling 62,513sq m with a small average lease size of 521sq m.

“Wangara also features a low average vacancy, now featuring 97 vacancies with an average size of 599sq m, followed by Osborne Park with 79 vacancies, with a slightly larger average of 628sq m.

“The South precinct has the greatest number of vacancies in Bibra Lake with many larger vacancies seeing average sizes at 1,064sq m, O’Connor this period has seen a growth in the midrange sizes with an average vacancy of 714sq m.

“Forrestdale moved off the top three list this period recording just 20 vacancies, all small in size bringing the average size smallest of all Perth regions of just 289sq m.

“It’s been an exciting time for the Perth industrial market, although vacancies remain high, rents look to have reached their bottom.

“An uptick in leasing activity during 2019 has seen some slight upward change in net face rents for prime assets albeit, only very limited, while after some further stock absorption, secondary rents are likely to follow slowly after with some lag.”

*Ray White Between the Lines commercial research – Perth industrial sub 5,000sq m leasing market – October 2019.

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