Perth’s industrial land values have reached a low point and are tipped to rise as the economy recovers.
WESTERN Australia’s industrial land values have hit a cyclical trough and demand is poised to increase in the medium-term, according to the latest industry analysis.
September quarter statistics from industry analysts Jones Lang LaSalle show prime grade rents are close to stabilising throughout Perth, despite subdued tenant demand in the quarter.
“While average prime rents have corrected by 11.6 per cent on an annualised basis, they only fell a further 0.8 per cent over the September quarter, which indicates a positive outlook for the market,” Jones Lang LaSalle’s WA national director of industrial services, Richard Parry, said.
“Further evidence the market is nearing a point of equilibrium is the fact that rents across all categories declined on average by 1.3 per cent in Q3, well below the 6.3 per cent experienced in Q2.
“Whilst prime grade yields have eased from their lows of 6.5 per cent to now range between 8 per cent to 8.5 per cent, investors are still seeking modern assets with high quality tenants on long-term leases and the industrial market fits this category.”
In terms of land values, Jones Lang LaSalle WA research manager Andrew Bouhlas said the Perth industrial market appeared to have reached its cyclical trough, and demand was likely to increase in the medium-term as economic conditions improve and population growth in WA fuels activity.
Colliers International’s industrial agency director, Wayne Chorley, echoed the sentiment that industrial land values had bottomed out and were on the cusp of recovery.
“Land has come down in value, from the record highs of 2007,” Mr Chorley said.
“My belief is that it has bottomed-out, and there seems to be a new-found confidence in the WA economy riding on the back of the Chevron/Gorgon announcements and the other big resources projects that have been announced of late.
“There was always that demand there for land, the increased confidence is now seeing things happen.
“There does seem to be a different, much more confident outlook.”
Mr Parry said with the stabilisation of rents and land values returning to sustainable levels, development viability would improve across the sector.
“This will lead to decisions on future supply in the early part of 2010, as the current supply pipeline remains thin, with only 25,500 square metres to come on line in 2010,” he said.
Mr Bouhlas said the 10-year average for new industrial land supply in WA was 121,500sqm per year.
He estimated 120,000sqm would come online in 2009, down from the “bumper” 286,761sqm of industrial land supplied in 2008.
State agency LandCorp currently has more than 90 lots available across its industrial estates, with lots ranging from 2,000sqm to eight hectares.
Treasurer Troy Buswell said the state government would be working predominantly through LandCorp to ensure there was adequate supply of industrial land to meet the expected rise in demand.
In September, LandCorp reduced its land prices by five to 25 per cent at eight of its major industrial estates to encourage industrial investment in WA.
“The real issue on industrial land supply and its impact in this state is in regional areas and I can tell you that Minister [Brendon] Grylls, in his role as the minister for state development and for LandCorp, is heavily focused on that,” Mr Buswell told a press conference this week.
“In regional Western Australia in particular, the supply of land, whether it’s for residential or for industrial purposes, is one of the key factors impacting negatively on regional development, so there is a focus from Minister Grylls and LandCorp ensuring that there is an adequate supply of industrial land.”