29/07/2015 - 10:40

Industrial vacancies hit record high

29/07/2015 - 10:40

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Industrial vacancies hit record high

Rents are falling and vacancies in industrial property have hit an all-time high in Perth, as the fallout from the resources slow-down continues to flow into the real estate sector.

Commercial agency CBRE's quarterly look at the market showed rents were declining in all areas in the three months to the end of June, with prime rents in the east and south down 6.3 per cent to $112 per square metre since the same time last year, while in the north, rents fell by 5.3 per cent to $107/sqm.

CBRE senior research manager Mark Lafferty said the decreasing rents were in line with the transitions under way in the resources sector.

"Consolidation is the main driver behind current demand, with many occupiers looking to cut costs long-term and increase efficiency," he said.

On the supply side, new projects remain subdued, Mr Lafferty said, with 101,000sqm of new industrial properties due for completion over the next 12 months.

That includes Aldi's distribution centre at Jandakot, Hitachi's headquarters in Forrestdale and Komatsu's Welshpool distribution facility.

Mr Lafferty said the industrial market in Perth experienced modest yield compression over the quarter, driven largely by the low interest rate environment.

Knight Frank also released research on the industrial market this week, which showed the level of available space in properties over 2,000sqm was up 22 per cent in the June quarter, to a record high of 559,016sqm.

Knight Frank WA research analyst Balveen Kaur said that was 97 per cent over the long-term average and 84 per cent higher than the same time last year.

The largest increase was in the east, which experienced a 31.3 per cent rise in vacant stock.

"The Perth industrial market continued to experience an increase in vacancy of secondary properties as businesses seek to improve cost efficiencies and consolidate their industrial accommodation while others take advantage of the soft market conditions for an upgrade in quality of accommodation," Ms Kaur said.

"This is evident as the vacant industrial stock was predominantly made up of secondary quality assets.

"On the other hand, prime quality industrial space availability increased by a mere 8 per cent from the last quarter, making up 39 per cent of the overall vacancy as at July 2015."

Ms Kaur remained confident in the long-term fundamentals of the Perth market, notwithstanding a reduction in demand from resources-related players.

"Improvement in labour market conditions within the retail and construction sectors is expected to have positive flow-on effects through to Perth's industrial market over the coming year," she said.

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