Industrial rents threat

An ample supply of industrial land coupled with softening conditions in the resources sector could lead to downward pressure on rents, new research has found.

Industrial vacancies across the metropolitan area were up 15.3 per cent in the three months to the end of October, according to research from commercial agency Knight Frank.

Vacancies rose by 1.9 per cent and 6.1 per cent in the north and south regions, respectively, while in the eastern suburbs there was 21.5 per cent more industrial floor space available than in the previous quarter.

Gross take-up of industrial land in the October quarter, Knight Frank said, was 45,482 square metres, a 3.1 per cent reduction on July quarter levels.

Knight Frank’s research showed that about 91,200sqm of new industrial space had entered the market each year since 2010, with eight properties comprising more than 86,000sqm currently in the planning phase or under construction.

The majority of the construction activity has been pre-committed and localised within the eastern suburbs, including Kewdale, Welshpool, Forrestfield and Hazelmere.

About 37,000sqm of pre-committed office/warehouse space is also currently under construction at Jandakot Airport.

The extra space is expected to result in downward pressure on rents, Knight Frank said, as landlords attempt to secure tenants.

There is some resilience in the sector, however, with analysis of the sector by commercial agent CBRE showing industrial rents in Perth rose 4.9 per cent in the year to September 30, with the oil and gas sector, particularly liquefied natural gas, driving the growth.

Colliers International director of industrial Wayne Chorley told Business News his agency was experiencing increased levels of enquiry for industrial assets, especially those over 3,000sqm.

“The leasing market has been pretty hard the last six months, but the last month we have seen a bit of renewed activity,” Mr Chorley said.

“Enquiry levels are up and there’s more action happening.

“There’s more stock on the market now, there’s a bit of sub-lease space available, but all in all it’s still a fairly tight market at the bigger end of the market, e.g. the larger warehouse space.

“It’s right across the board – transport, general warehousing, and workshop space, there’s a big demand for workshops with overhead cranes.”

While sales and investment in industrial properties has been largely subdued for the past six months, Mr Chorley said private investors and owner-occupiers had largely driven recent activity, with the most interest being shown in well-located properties in the sub $10 million range.

“Owner occupiers are very active on the sales side of the market, buying up vacant possession properties,” he said.

“People are taking advantage of record-low interest rates and the banks are a little more user friendly when it comes to borrowing money for vacant land or vacant property.”

The largest recent transaction was the sale of 2 Bannister Road in Canning Vale, which was sold to Charter Hall’s Core Plus Industrial Fund for $70.5 million in October.

At Malaga’s Freeway Industrial Estate, 70 per cent of sales in recent months have come from owner-occupiers, according to MLV Real Estate managing director David Lamb.

Mr Lamb, who recently brokered the $2.72 million sale of a Freeway estate lot, said record low interest rates were making it financially more attractive to firms to buy land and build rather than lease existing facilities.

“The recent sale on Beringarra Avenue is a case in point, as it was purchased by a major fabrication business that plans to build a manufacturing facility on site,” he said.