RESEARCH

Perth industrial buoyed by investors and occupiers demand

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PERTH’S industrial property market defied national and global economic disruption in 2020 and is now experiencing a strong start to 2021.

According to Ray White’s latest Perth Industrial Vacancy and Market Overview, despite shaky moments of uncertainty due to lockdowns and border closures from COVID-19, sentiments have not only remained strong but have improved for the industrial market and the state at large.

Perth’s property transaction volumes were up 10.7% in 2020 on the previous year’s results, with $828.69 million in transactions being record.

“In terms of vacancy, this period’s count shows outstanding results when compared to six months ago where vacancies were up, and rents showed signs of tightening. We are now seeing enquiry levels lift and vacant assets or secure leased investments for sale moving quickly,” read the report.

Within the sub 5,000sqm market for this period, there is only 663,613sqm of vacant stock across the entire Perth industrial market, down 1.10 million sqm in October of last year.

The East holds the greatest amount of unoccupied stock at 39.79% or 263,930sqm, the North follows with 35.3% or 234,166sqm, while the South represents just 24.9% or 165,220sqm.

Vacant listings have fallen by 47.1% over the year, representing just 683, with listings in the East dropping by 25% over the year, followed by the South at 14.8% and the North with 9.17%.

Vacant buildings are also receiving fewer enquiries and transactions; as current market conditions have rendered purchasing a facility as the smarter option, while current tenants are seeking out more modern properties in the sector.

Interest is high from local, national and overseas investors in fully tenanted properties with a minimum five-year lease.

Owner occupiers however, are the greatest driver in industrial demand, thanks to the historic low interest rates, government stimulus high bank lending rates, which are sometimes as high as 80% rather than the typical 60% to 70%.

Prime industrial yields are currently in the 6.00% to 7.00% range, offering greater value to investors compared to other major Australian cities.

The rental market had a rockier 2020, with lowered sentiment and growing uncertainty in the market, however this is shifting in 2021, as businesses seek to relocate and grow.

“The average net face rents remain at $86/ sqm for the East, North $90/ sqm and South

$83/ sqm. What is important to note is the grade/quality of the facilities. We are still seeing that older facilities compared to newer Premium and A grade facilities are leasing at lower rates and require either capital improvements or much larger tenant incentives in order to achieve a result,” reported Ray White.

While last year forecasts anticipated a 10% fall in rental rates in 2021, these numbers have sat steady, as incentives have shrunk, supply has remained limited and vacancies continue to decline.

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