Perth, 4 June 2013-Land supply constraints and a shortfall in supply levels will continue to drive industrial rents upwards, according to new data from CBRE.
The Q1, 2013 Australian Industrial MarketView report found that, while engineering activity and its contribution to the industrial market is anticipated to decline, demand from other sectors of the economy such as transport and energy may provide a buffering effect.
During the first three months of 2013, development activity was relatively subdued within Perth’s industrial markets.
CBRE Senior Research Manager of Industrial Markets Luke Dixon said despite this, strong demand for industrial properties in the Western Australia capital would underpin growth in the sector.
“Supply of new prime industrial assets is an ongoing challenge for the Perth market, due to the limited availability of serviced land near Perth’s growth centres,” Mr Dixon said.
Demand for high quality units over 3,000sqm remained high during the quarter, while large-scale lots saw greater demand from international occupiers with specific operational requirements. The most active tenants over the period were those in the transport and logistics, service and maintenance, and equipment hire industries.
“As long as Perth’s industrial supply levels remain tight, rents will continue to face upward pressure, leading to occupiers and investors seeking opportunities in secondary markets,” Mr Dixon added.
Industrial rents remained relatively stable over the three-month period, with this likely to continue over the coming months before noticeable increases in the second half of the year. In the year to March, A and B grade warehouse rents jumped five per cent.
By comparison, a shortage of land with industrial development potential has caused land values in Perth to steadily rise, with this more evident in traditional industrial areas that offer well serviced lots.
A grade warehouse capital values increased 5.6% for the year to March – the second highest growth recorded nationally during the 12-month period.
CBRE Director of Perth Industrial and Logistics Services Geoff Fraser said the shortage of available industrial assets has spurred a spike in land sales, stimulating market growth and improving consumer sentiment as a result.
“As market conditions improve, confidence returns and the sector stabilises, we expect to see increased activity in both sales and leasing towards the end of 2013 and early 2014,” Mr Fraser explained.
Over the course of 2013, approximately 118,000sqm of new supply is expected to be completed in Perth, with the majority of this stock in the southern and eastern sub-regions. Companies that operate in the transport, logistics, and resources sectors will account for the lion’s share of new developments over 5,000sqm in size.
For the 2012 year, transactional activity across 17 major deals totaled $219 million, with the 2013, Q1 achieving $99 million across four significant transactions.
The data shows that local high net worth individuals and private syndicates remain the most active buyers in the industrial property sector, with evidence of institutional buyers also re-entering the market. As the market strengthens, more companies are entering into sale and leaseback transaction in order to reinvest capital into the business.
Prime grade yields dropped during the first quarter and now range between 6.75% and 8.75%, while secondary grade property yields also fell to between 8.25% and 10.5% respectively.
“Yields are likely to compress further due to below average supply levels, and rising competition between investors for prime locations is anticipated to continue in 2013,” Mr Dixon said.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website atwww.cbre.com.au.