Industrial land supply threat

Perth's industrial land sector is likely to experience a short-term supply shortage, with land values the most expensive in the nation and high construction costs affecting developers’ ability to create new facilities.

Research released by commercial real estate agency CBRE showed around 70,000 square metres of new industrial supply would come online in 2014, but very few developers were building speculatively.

The majority of new supply, CBRE said, was for pre-committed buildings bigger than 3,000sqm.

“Supply levels are likely to drop for industrial in the short-term,” CBRE said.

“Land shortages remain with land values being the most expensive in the nation.

“This factor, coupled with high construction costs, is impacting development feasibility.”

The report also showed grade A warehouse space in Perth has an average capital value of $1,466/sqm, with average net rents coming in at $122/sqm.

The next most expensive capital city was Brisbane, with top quality warehouse space valued at $1,434/sqm on average and average rents at $116/sqm.

The report also found pre-lease rents on industrial facilities Perth range from $130 to $150/sqm, making it more expensive for tenants to pre-commit to new builds.

However industrial sales in 2013 reached their highest value since 2010, totalling $255 million.

During the first quarter of 2014 there were three industrial investment transactions valued more than $5 million, collectively totalling $39.3 million.

Two of the properties were sold in January by developer Primewest to Australian Industrial Real Estate Investment Trust, a listed entity controlled by eastern states-based property fund Fife Capital.

Colliers International brokered the deals, for the former Trailcraft facility in Henderson and an 18,235sqm Phoenix Box Plant in Bibra Lake.

The third property was a 44,000sqm industrial site at The Landing in Port Hedland, which was sold for $7.5 million in a deal brokered by JLL.

CBRE said the most sought after properties were logistics or resources-sector related assets in core locations such as Welshpool, Canning Vale and Hazelmere.